Nifty ends below 5600

bullsbears24th  June, 2013 : Comments by Amar Ambani, Head of Research, India Infoline (a well diversified financial services company)


That sinking feeling….Nifty ends below 5600


The torrent unleashed by fears of an early rollback of stimulus along with weak economic cues culminated in benchmark indices getting the blues on Monday. It was a terrible start to the week as the Nifty slipped another 77 points and fell below the 5600 mark – the levels last seen on April 16.

The market opened in the red to weak Asian, US cues. For three times on the trot it took support around 5,600 levels, but that bastion of hope too fell with the onslaught by the bears.

The extend of the weakness in the market can be gauged by the fact that not a single sectoral indices ended in the black.

Realty, consumer durables, capital goods, FMCG and power were among the major laggards in trade today. But what’s worrying market watchers is the selling in mid- and small-cap stocks, which was intense as compared to benchmark indices. The broader indices fell by 2.5% and 2.1%, respectively.

The domestic sell-off was in line with Asian peers. MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.8% to its lowest since early September, after posting its worst week since May 2012, with a drop of 4.5% last week. The Hang Seng index fell 2.4% while Shanghai shares plummeted 5.4%.

The Sensex finally closed at 18,540, down 233 points, while the Nifty ended 77 points lower at 5,590.

Volatility, as measured by India VIX, breached the 20 mark for the first time since June 29, 2012. It closed up 10% at 21.01 after hitting a day’s high of 21.79 and low of 18.48.

The advance-decline ratio favoured the bears. On the Bombay Stock Exchange, 1,633 stocks declined against 652 advances, while 115 stocks remained unchanged.

The losers pack was led by JP Associates, Ranbaxy, DLF, Kotak Mahindra Bank, Asian Paints, Cairn India, Reliance Infrastructure, Punjab National Bank, Sesa Goa and Ambuja Cement. The few gainers included Jindal Steel, Lupin, ACC, ICIC Bank, HDFC, Bank of Baroda, Reliance Industries, Tata Power and Coal India.

The banking index has fallen 16.5% from its May peak on slow policy easing and concerns over asset quality. But Amar Ambani, Head of Research at IIFL, is not too perturbed. “The recent correction provides investors with an opportunity to enter into high quality private banks such as Axis Bank, HDFC Bank, Yes Bank and IndusInd Bank. These stocks also carry strong earnings growth visibility. On the other hand, public peers appear oversold and are less likely to bounce back in the near term given their weak earnings outlook.”