Profit booking, crude spike pulls down Sensex over 200 pts; Nifty below 10,250

Profit booking, crude spike pulls down Sensex over 200 pts; Nifty below 10,250

The Sensex closed down 227.80 points or 0.68% at 33227.99, while the Nifty was down 82.10 points at 10240.20.

After three strong sessions, profit booking coupled with spikes in crude and bond prices dragged the Indian market lower on Tuesday, with the Sensex shedding over 200 points, while the Nifty ended below 10,250-mark.

Brent oil prices jumped 1.5 percent on Tuesday to their highest since mid-2015, after the shutdown of the Forties North Sea pipeline knocked out significant supply from a market already tightening due to OPEC-led production cuts.

Spike in bond prices also led to a sharp fall in public and private banks as the Bank Nifty shed over 270 points, Axis Bank, Kotak Mahindra Bank, ICICI Bank, Yes Bank, and Federal Bank, among others ended in the red.

"Weakness in Asian stocks and subdued trading on European bourses weighed on sentiment in the domestic bourses. Investors largely remained skittish in anticipation of some macro and micro developments in various pockets of the world," Karthikraj Lakshmanan, Senior Fund Manager – Equities, BNP Paribas Mutual Fund said in a statement.

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The Sensex closed down 227.80 points or 0.68% at 33227.99, while the Nifty was down 82.10 points at 10240.20. The market breadth was negative as 993 shares advanced against a decline of 1,679 shares, while 149 shares were unchanged.

ONGC, Dr Reddy’s Laboratories, and Adani Ports were the top gainers, while Coal India, Hero MotoCorp, HPCL and Bharti Infratel were the top losers.

Among stocks, major stocks ended on the lower side. HDFC Bank, TCS, and ITC, among others, saw negative moves.

Dr Reddy's Laboratories shares ended 2 percent higher on getting clearance to Bachupally plant. The pharma major informed exchanges that it has received an establishment inspection report from the US Food and Drug Administration on Monday after closure of audit of Bachupally unit, Hyderabad. In April, the USFDA conducted an audit of this formulation manufacturing plant 3 and issued a form 483 with 11 observations.

Zee Entertainment ended over 0.23 percent higher as Credit Suisse maintained ‘Outperform’ rating on Zee Entertainment Enterprises with a price target of Rs 610, implying upside of 7 percent from Monday's closing price. The research house expects strong earnings report in the second half of FY18 and holds positive growth outlook on advertising and subscription. The research firm said cut in the GST rates will support advertising in the next financial year and Phase 3 digitisation benefits should start benefiting Zee Entertainment in the next financial year.

Profit booking was visible in Motherson Sumi, which ended around 0.50 percent lower after it nearly gained 2 percent intraday after Goldman Sachs upgraded the stock as well as raised target price sharply. The firm upgraded the auto ancillary company to buy from neutral and raised price target to Rs 430 (from Rs 318 per share), implying 13.5 percent potential upside from Monday's closing price. "Motherson is the best positioned among our India autos coverage," the research house said while raising revenue estimates for the next three financial years by 5 percent, 9 percent and 8 percent, respectively.

Meanwhile, Oil marketing and aviation companies' share prices fell 2-3 percent on Tuesday following sharp rise in crude oil prices in international market.

HPCL, BPCL and IOC declined 2-4 percent while Jet Airways, SpiceJet and InterGlobe Aviation (IndiGo) were down 1-2 percent each. Oil retailers are allowed to make changes in petrol and diesel prices on daily basis, tracking international crude oil prices but it won't possible for them to increase it sharply when oil prices, like today, are trading at highest level since 2015. As the state elections lined up before general elections 2019, it is difficult for the government to allow oil marketing companies hike petrol and diesel prices sharply. So these PSU companies have to bear that burden and that is why stocks are correcting. Any increase in crude oil prices is always bad for aviation companies as oil retailers always pass on hike first to aviation. It is the key cost for aviation companies, so any increase in that cost hit their financials.

Meanwhile, Alembic Pharmaceuticals ended 1 percent higher on receiving approval from the US health regulator for drug that treats overactive bladder. The pharma company received approval from the US Food and Drug Administration for its abbreviated new drug application (ANDA) Darifenacin extended-release tablets, 7.5 mg and 15 mg. The drug is therapeutically equivalent to Enablex of Allergan Pharmaceuticals.

Going forward, experts are anticipating a negative move going forward. "The issue inherently is that we are constantly underperforming our global peers and prices seem to have run up without the underlying fundamentals catching up yet. We continue to maintain a negative outlook and advocate holding shorts at the current juncture." Nikhil Kamath, Co-Founder and Head of Trading, Zerodha said in a statement.

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