Traders book profits after initial euphoria ebbs out

State-owned oil firms like ONGC will invest over Rs 74,800 crore in capital expenditure in 2011-12 fiscal, most of it from internal resources.

The stock markets which zoomed past 18,000-level on a slew of investor-friendly budget proposals like higher FII investments in corporate bonds and cut in tax surcharge, saw frenetic profit-booking wash away a big chunk of gains with Sensex closing only 122 points up.

The BSE benchmark Sensex shot up 600 points intra-day on various positives, but a rise in minimum alternate tax (MAT) dampened the sentiment. Besides, marketmen said investors remain concerned over rising current account deficit and high inflation.

The popular Sensex at BSE, which had soared by around 600 points in the aftermath of Mukherjee’s speech, caved in more than 400 points from intra-day highs and slipped below the 18k mark to end up a mere 122.49 points or 0.69 per cent at 17,832.40 points.

The 50-unit Nifty at NSE ended up 29 points at 5,333. The midcap index ended at 6377, higher by 23 points and the smallcap index shut shop at 7,820, up 30 points.   “There was short-covering rally in noon trades, with event risk and accompanying nervousness behind us,” said a trader at D-Street as the rally was triggered by lower fiscal deficit target set by the government for year ended March 2012 despite subsidy burden accruing from oil and fertiliser spaces.

“The budget was a mildly populist one and largely attempted to tame inflation and rein in the fiscal deficit,” said an analyst. “The stock market reaction has been positive only because equities had factored in heavy pessimism like rise in excise duty, service tax rate and a bigger market borrowing figure. Overall a marginally positive budget, largely along expected lines,” he added.

“The market was extremely nervous prior to the announcement of the budget, and was fearing a tough budget,” another observed adding rise in MAT rate to 18.50 per cent from book profit from 18 per cent, made operators as well as retail investors to book profits at higher levels.

Analayst avered whether the budget would change the trajectory of the markets — that have been in a bear grip since the last three months —will be clear in the next few trading sessions.  Investors, however, continued to take a cautious view of second line shares.

The BSE Midcap Index closed a modest 0.31 per cent higher at 6373.23, while BSE Smallcap closed 0.36 per cent higher at 7,817.32 points as investors chose to book profits rather than hold on to their positions. Mid and small cap shares have taken a beating in the recent market downtrend, trapped in a vicious cycle of falling share price and low liquidity.

The market breadth, indicating the health of the market, was positive as 1,601 shares on BSE advanced while 1208 scrips declined and a total of 126 shares remained unchanged. BSE clocked turnover of Rs 4060 crore higher than Rs 3492.49 crore on Friday.

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