Market close: Sensex, Nifty pulled down by political drama over government formation in crucial Karnataka

The BSE's benchmark Sensex and the NSE's Nifty finished lower on Wednesday as market players took their cues from political developments in Karnataka, where the race to govern the state is far from over.

The 30-share Sensex opened lower at 35,452.35 points, oscillated between 35,241.63 and 35,543.89, and finished 156.06 points or 0.44 percent lower at 35,387.88. points.

The 50-share NSE Nifty remained in red territory through the session and closed the day 60.75 points or 0.56 percent lower at 10,741.10 points. During the day, it vacillated between 10,699.70 and 10,790.45.

Brokers said investor sentiment was subdued following the uncertainty over government formation in Karnataka, which has thrown up a hung verdict. A Congress-JD(S) alliance could rule the state for the next five years. The BJP hasn't given up as yet.

Sameet Chavan, Chief Analyst-Technical and Derivatives, Angel Broking, in a note to clients, said: “It was yet another day of some roller-coaster moves in our market. However, the overall range as compared to the previous session was a bit small. The Nifty opened lower with nervousness due to some political uncertainty post the Karnataka election verdict. Index then continued its weakness to test the 10,700 in the initial hour. However, emergence of strong buying around day’s low resulted in a v-shaped recovery in the subsequent hours. Eventually, a small correction towards the end led to a close below 10,750 by shedding more than half a percent from the previous close.

"Technically speaking, the ‘Gravestone Doji’ pattern formed during the previous session has now been confirmed on a closing basis. Thus, going ahead, yesterday’s high of 10,929.20 can be termed as a near term peak. For the coming day, 10,700 would be seen as a crucial support. A sustainable move below this would augment the selling pressure in the market to slide towards 10,650 – 10,600 levels. On the higher side, 10,790 followed by 10,830 are likely to act as stiff hurdles and similar to today’s session, one can expect a selling pressure around these intraday resistance points.

"Although, the overall sentiments have dampened in last couple of days, yesterday’s second half was quite encouraging for so many individual counters who showed some life. Apart from this, stellar moves being witnessed from the marquee FMCG counters. Hence, traders need to keep a close eye on this pocket as well. Considering this, a possibility of some range bound action in the benchmark index cannot be ruled out.”

Earlier, a little past noon, the Sensex was trading 0.45 percent lower to 35,384.77 points at 12:15 pm, while the Nifty was trading 0.57 percent lower to 10,740 points, amid uncertainty over government formation in the southern state and sustained foreign fund outflows.

The benchmark Sensex tumbled over 245 points in morning trade on Wednesday, and traded 0.69 percent or  245.23 points lower to 35,298.71. The NSE Nifty fell 72.85 points, or 0.67 percent, to 10,729. Sectoral indices led by the bankex, PSU, oil and gas and healthcare traded in the red, down by up to 1.90 percent.

Brokers said that apart from political uncertainty in Karnataka, a weak trend at other Asian bourses following overnight losses on Wall Street dampened sentiments. Hong Kong's Hang Seng shed 0.49 percent while Japan's Nikkei was down by 0.38 percent in early trade on Wednesday. The Shanghai Composite Index too inched lower by 0.25 percent.

Global markets were stumped after North Korea cancelled high-level talks with Seoul and threatened to call off the much anticipated summit with the US if it was pushed into unilaterally giving up its nuclear arsenal. The US Dow Jones Industrial Average ended 0.78 percent lower on Tuesday.

Back home, the trade deficit has widened, to $13.7 billion in April, which further affected trading sentiment.

Prominent losers included Hero MotoCorp, ICICI Bank, SBI, Adani Ports, RIL, ONGC, Axis Bank, Bajaj Auto, M&M, Coal India, IndusInd Bank, NTPC and Bharti Airtel, falling by up to 3.27 percent.

RCom shares tumble

Shares of Reliance Communications (RCcom) tumbled 20.5 percent, a day after the NCLT admitted an insolvency petition filed by Ericsson against the company and two of its subsidiaries. The stock, after making a weak opening, tanked 20 percent to Rs 9.95 on the BSE. At the NSE, shares of the company dived 20.56 percent to Rs 9.85.

Weakness was also seen in other group stocks, with Reliance Naval and Engineering trading lower by 6.23 percent, Reliance Nippon Life Asset Management 2.70 percent, Reliance Power 1.19 percent and Reliance Capital one percent during the afternoon trade on the BSE.

The National Company Law Tribunal (NCLT) has admitted an insolvency petition filed by Swedish communications equipment major Ericsson against Anil Ambani-run RCom and two of its subsidiaries seeking to recover Rs 1,150 crore.

Ericsson had signed a seven-year deal in 2014 to operate and manage RCom's nationwide telecom network but has not been paid the bill. The tribunal admitted the petition on Tuesday which could potentially result in delaying RCom's plans to sell assets to lighten its debt load. In a statement, the company said, "RCom and two of its subsidiaries - Reliance Telecom and Reliance Infratel - await detailed order from NCLT, allowing the Ericsson application for admitting the companies to debt resolution under the IBC."

Rupee rebounds

The rupee rebounded by 27 paise to 67.80 per dollar in early trade on Wednesday on fresh selling of the US currency by exporters and banks. On Tuesday, the rupee had lost 56 paise -- the second biggest single-day fall of 2018 -- to end at a new 16-month low of 68.07 as panic dollar demand rattled the currency market.

Traders said the dollar's strength against other currencies overseas, as a surge in the benchmark 10-year Treasury yield above three percent reignited a rally that had lost steam last week, capped the rupee's gains.

FPIs sell

Meanwhile, foreign portfolio investors (FPIs) sold shares worth a net Rs 518.47 crore, while domestic institutional investors (DIIs) bought shares worth Rs 531.33 crore on Tuesday, as per provisional data.

Earlier on Tuesday, the Sensex soared more than 400 points in intra-day trade after leads showed that the BJP emerged as the single largest party in Karnataka. However, it gave up all its gains to end modestly lower after the Congress unexpectedly stitched up a post-poll alliance with the JD(S) and staked claim to form the government in the southern state.

With inputs from PTI