Markets Lose Gains After Opening In Green

This morning turned out to be quite an alarming one on the bourses. The Nifty at one point showed losses of 150 points, but it was later clarified by the exchange that there was some technical glitch, which was quickly rectified.

The markets opened on a flat, positive note but lost their gains immediately. They are currently trading in the red zone due to profit booking. It seemed that the markets have priced in yesterday's news of the second round of reforms by the UPA government. Both the Sensex and Nifty are trading lower by 0.33% and 0.35% respectively.

In the Cabinet meet yesterday, the government cleared 21 big ticket reforms. As much as 26 per cent FDI in pension was cleared and the insurance and PFRDA bills were approved. The Cabinet also proposed foreign equity cap in both sectors be hiked to 49% from the earlier 26%. However, investors remain concerned over the clearance of these bills in the Parliament.

The Indian rupee continued to appreciate for the third consecutive day on the selling of more dollars by exporters the and constant inflow of foreign money. The rupee rose by 0.58% or 30 paise to 51.44 against the US dollar.

All the BSE sectoral indices are trading negative right now. Tech, IT and Pharma are leading the losses, down by 1.30%, 1.29% and 1.23% respectively. Others like Realty, Consumer Durables, Power, PSU and Bankex are trading lower in the range of 0.42%-1.03%.

The other Asian indices Nikkei and Hang Seng are trading on a mixed note. Hang Seng is up by 0.31 %, while Nikkei is marginally down by 0.11%. The Shanghai market is closed on account of a public holiday.

Back home, major IT stocks and index heavyweights like Infosys, TCS and Wipro are down by 1.26%, 1.52% and 1.24% respectively. The appreciation in the rupee is negative for the most of the IT companies, who largely depend on exports. Pharma stocks are also trading lower, with Aurobindo Pharma, Lupin and Sun Pharma among the major losers, down by 3.67%, 1.52% and 1.16% respectively.

HDFC fell 3.84% at Rs 757.60 on the BSE after large block deals were executed in the counter at the onset of the trading session.

The market breadth, which indicates the overall health of the market, is positive as of now. On the BSE, 1065 shares have advanced, 1058 shares have declined and 105 shares are unchanged.

We believe that the markets have been in an overbought situation in the last few sessions, and are thus trading negative despite the second round of reforms. The upside from here on seems to be limited, and we ask investors to remain cautious.