Senex falls over 450 pts from day\'s high\, ends 63 pts lower; IT stocks top drags

MUMBAI: Weakness in IT stocks and a block deal in Bharti Airtel erased early gains for the benchmark equity indices on Tuesday, although the broader market displayed optimism that was visible in world equities as more economies opened up gradually.

Overall, the near-term outlook of the market hinged on an update on relaxation or extension of the lockdown post-May 31, March quarter GDP data, US-China political tensions and the spread of coronavirus locally.

“After opening up by more than 1 per cent, benchmark indices pared gains to close flat, with a negative bias. However, global market cues were positive on the back of additional stimulus measures and slow reopening of economies globally,” said Vinod Nair, Head of Research at Geojit Financial Services.

"The unabated rise of infections continues in India, which throws up further uncertainties with regards to the extension of lockdown measures," he added.

After rising as much as 414 points in early trade, Sensex closed 63 points lower, primarily weighed down by the weakness in IT stocks. Software exporter Infosys was the biggest contributor to losses in Sensex as it shed 1.50 per cent, while its rival Tata Consultancy Services (TCS) shed 3.74 per cent.

“US is the biggest market for Indian IT companies and there will be some bit of demand contraction for them as we see a few retailers going bankrupt there,” said Aditya Khemani, Fund Manager, Motilal Oswal Asset Management Company.

“Also, because of low rates in the US, obviously BFSI (banking, financial services and insurance) as a space will have much lesser profits and hence they would spend slightly lesser in terms of discretionary IT spend,” he told ET Now.

Meanwhile, shares of Bharti Airtel shed 5.71 per cent to Rs 559.15 after Bharti Telecom, the holding company of the telco on Monday, announced a stake sale of 2.75 per cent in the unit at a price of Rs558/share, a 6 per cent discount to the current market price, via a block deal for raising around $1 billion.

Key highlights

• The 30-share Sensex closed 0.21 per cent or 63 points lower at 30,609, while the 50-share Nifty shed 0.11 per cent or 10 points to close at 9,029.

Agencies

• Earlier in the day, Sensex gained as much as 1.35 per cent or 414 points to 31,087, while Nifty climbed as much as 1.35 per cent or 122 points to 9,162.

• Despite a negative close for the benchmark indices, the breadth was marginally positive. Advancing shares outnumbered the declining ones in the ratio of 1.1:1 on the BSE.

• In the broader market, BSE mid and small-cap indices rose 1.21 per cent and 0.63 per cent, respectively.

• BSE Teck index followed next with a 2.57 per cent decline, led by losses in Bharti Airtel and TCS.

• BSE Consumer Durables index rose 2.55 per cent, buoyed by gains in Titan and Crompton Greaves Consumer Electricals which rose 5.14 per cent and 1.01 per cent, respectively.

• Radhakishan Damani-backed Avenue Supermarts slumped 4.67 per cent on Tuesday after the company warned that the challenges are likely to continue in the current financial year as the economy gradually opens after the lockdown, even as it reported a 42 per cent rise in March quarter net profit.

• Leading automotive components maker Bosch dropped 1.74 per cent as it announced a sharp decline in profits for the March quarter due to a slowdown in the automotive sector and exceptional expenses occurred to provide for asset impairment and restructuring projects.

• For the year to date, foreign institutional investors (FIIs) have withdrawn a net of $5.5 billion (Rs 41,946.10 crore) from Indian equities, while domestic institutional investors (DIIs) have pumped in a net of Rs 75,993.25 crore in the asset class.

Key factors influencing the market

• Sharp rise in coronavirus infections

The daily coronavirus infections rose by more than 6,500 for the fourth straight day, taking the total number of coronavirus cases in India to 145,380. The death toll rose to 4,167 after 146 new deaths. India is now among the 10 countries with the most number of coronavirus cases.

• Weak GDP print

India’s economy is likely to have expanded at its slowest pace in at least eight years in the January-March quarter, partly as a result of the coronavirus clampdown, a Reuters poll predicted. The poll of 52 economists, taken May 20-25, indicated India’s economy grew at 2.1 per cent in the March quarter from a year ago, its weakest since comparable records began in early 2012, and sharply slower than 4.7 per cent in the prior three months.

• Firm global stocks

Global stocks rallied with US equity futures on Tuesday as further moves to ease coronavirus lockdowns in major economies outweighed concerns over escalating geopolitical tensions, Bloomberg reported. The Stoxx Europe 600 Index jumped, with travel stocks surging on reports that Germany plans to lift travel warnings for 31 European countries. Japan led the equity advance in Asia.

What to watch out for?

• The pace of the spread of coronavirus infections in the country will be closely watched.

• Investors will watch out for further relaxations in the lockdown that is extended up to May 31.

• Investors keenly await the March quarter GDP data due on Friday as it will provide an insight on the early impact of the lockdown.