Infosys#39; 2nd day correction drags Sensex 266 pts, Nifty below 9800; Midcap dips 1.5%

The further sharp slide in Infosys on Monday dragged the market to nearly two-week closing low and the Nifty below psychological 9,800 level. Weak global cues amid ongoing geopolitical tensions between North America & US and uncertainty over Trump’s administration also affected sentiment.

The 30-share BSE Sensex was down 265.83 points or 0.84 percent at 31,258.85 and the 50-share NSE Nifty dropped 83.05 points or 0.84 percent to 9,754.35.

The fall in broader markets was more than benchmarks as the BSE Midcap and Smallcap indices declined 1-1.5 percent on weak breadth. About two shares declined for every share rising on the exchange.

Further correction in market and breaking of 9,800 level clearly indicated that more downside is likely in near term as problem is not only in India but also globally, Ashwani Gujral of ashwanigujral.com said in an interview to CNBC-TV18.

Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol that as long as Nifty sustains above 9,685 levels than the probability of rangebound move between 9700–10,000 will be much higher whereas breach of the critical low of 9685 will dramatically alter the outlook for indices there by throwing up new targets in the zone of 9,500–9,450 levels.

All sectoral indices ended in red, with Nifty Auto, IT, Metal, Pharma and PSU Bank down 1-2 percent.

Infosys fell below the Rs 900 level, down sharply by 5.4 percent to Rs 870 (the fresh 52-week low) after brokerage houses downgraded the stock as Vishal Sikka’s resignation raised risk of management instability. The stock lost 9.6 percent on last Friday.

JPMorgan downgraded the stock to neutral from overweight and slashed target price to Rs 905 from Rs 1,075 as leadership vacuum and likelihood of more departures may hurt company.

Infosys lost market cap of over Rs 34,000 crore in the last two sessions. The fall in share price was despite the announcement of buyback of up to Rs 13,000 crore worth of shares at a price of Rs 1,150 per share (i.e. 25 percent premium over Friday’s closing price).

Essar Shipping and Essar Securities rallied 13 percent and 20 percent, respectively after Russian oil giant Rosneft-led consortium acquired 98.26 percent stake in Essar Oil for USD 12.9 billion. Essar Group is expected to repay some of its debt post this deal.

Kotak Mahindra Bank, Adani Ports, SBI, Tata Motors, ONGC, Sun Pharma, Dr Reddy’s Labs and BHEL were down 1.5-4 percent whereas HDFC, Axis Bank, TCS and ITC bucked trend, rising up to 0.7 percent.

Among midcaps, JK Tyre, Apollo tyres, MRF, Pincon Spirt, Sintex Industries, Eros International, Amara Raja Batteries, Escorts, RBL Bank, Federal Bank, Karnataka Bank, Bank of India, Allahabad Bank, L&T Finance, M&M Financial, Adani Enterprises, Ujjivan Financial, Suzlon, Jaiprakash Associates, HCC, Punj Lloyd, Oil India and Nitco Tiles crashed up to 17 percent.

However, PC Jeweller, Mukta Arts, HT Media, Tata Coffee, Tata Global and Manappuram Finance bucked trend, rising up to 11 percent.

On the global front, European markets edged lower as geopolitical uncertainty trickled over from Asian trading. France’s CAC, Germany’s DAX and Britain’s FTSE were down 0.1-0.3 percent at the time of writing this article. Asian markets ended mixed, with the Japan’s Nikkei down 0.4 percent and China’s Shanghai Composite up 0.6 percent.