Mumbai: Equity benchmarks closed flat with a negative bias amid volatility as unexpected spike in inflation and unstoppable violence in Iraq made investors cautious. The BSE Sensex fell 37.69 points to close at 25190.48 while the NSE Nifty managed to hold the 7500 level, down 8.55 points to 7533.55 but the broader markets outperformed benchmarks.
The BSE Midcap and Smallcap indices gained over 0.3 percent. Experts feel a sharp correction is unlikely till Union Budget (in July) but they remained cautious due to current situation in Iraq and monsoon. Dipan Mehta, member BSE, NSE is visibly worried about the Iraq crisis which can spike up oil prices further.
According to him, the other worry is the advent of a weak monsoon which will have a direct impact on inflation, which in turn will hurt corporate profits and may result in wider deficit. "So it is double whammy, weak monsoons and global oil prices," he says.
Mehta is extremely cautious and warns against pinning much hope on a pre-Budget rally. Instead he advises investors to wait and watch out how things pan out after next week. Saurabh Mukherjea of Ambit Capital says 23,000 is a strong base for the Sensex in this market. His year end target is 30,000.
Global markets remained under pressure with the Japan's Nikkei closing 1 percent lower and European indices trading in the red. Violence in Iraq continued to weigh on investors risk appetite as the Sunni Militia in Iraq moved closer to capital Baghdad. Back home, the wholesale price inflation in May shot up to a five-month high of 6.01 percent as against 5.2 percent in previous month and expectation of 5.3 percent, driven by spike in food, fuel as well as manufactured products prices. Inflation dragged the rupee to an intraday low of 60.23 a dollar compared to Friday's close of 59.76 a dollar before closing at 60.16, the lowest level since May 5, 2014.
Among stocks, banks saw selling pressure on rate hike concerns post inflation data while technology and PSU oil & gas supported the market. Shares of Reliance Industries, L&T, HDFC, ICICI Bank, Tata Motors, Axis Bank, M&M, SBI and Maruti Suzuki were down 1-2.6 percent. However, state-run gas utility Gail topped the buying list, up 4 percent. Brokerage house Nomura maintains buy rating on the stock and raised target price to Rs 525 from Rs 450 earlier. "We maintain our positive stance on the shares, even with the unexpectedly weak Q4.
Our conviction remains high on key segments (excluding petchem)," says the brokerage house in its note. ONGC and Cairn India were up 1.1 percent and 0.6 percent, respectively after media report suggested that ONGC may raise its stake in Cairn's prolific Rajasthan oil fields. Sources told CNBC-TV18 that Cairn is seeking 10-year extension of Rajasthan field till 2030 from government. Top IT services exporter TCS gained 2.4 percent after it kept its outlook on margin and revenue for Q1FY15 unchanged.
Its rivals Infosys and Wipro rose 1-2 percent. Drug maker Sun Pharma surged 2.5 percent followed by BHEL and Tata Power with over 1.4 percent. Hindustan Zinc rallied over 2 percent after sources say that government is planning to raise up to Rs 20,000 crore via stake sale in company and also expects to push the stake sales through by September-end. The market breadth remained in favour of declines as about 1384 shares advanced while 1565 shares declined on the BSE.
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