Market men were strangely unmoved after the Bombay Stock Exchange’s (BSE) benchmark 30-stock index Sensex fell 320 points, or 2.25%, ending a 609.18 point, six-day rally.
“There is nothing to read and nothing to panic in this,” said Deven Choksey, managing director of KR Choksey Securities Ltd, a brokerage.
The National Stock Exchange’s (NSE) 50-stock Nifty index closed the day at 4083.50, down 94 points or 2.26%. Asian and European markets also closed weak, on 27 April.
Although the correction came on a day when over 40 companies, including Bharti Airtel Ltd and Ranbaxy Laboratories Ltd, announced mostly strong results, analysts said the fall was unconnected with results in most cases.
The fall on 27 April was attributed to technical reasons, such as profit booking after a long uncorrected period and holidays next week.
“People are seeing money after a long and painful time. So, there is bound to be profit booking,” said Rahul Rege, head of non-institutional securities at Brics Securities Ltd, a brokerage.
With lower economic and corporate growth expectations for 2007-08, investors may also have been looking for booking profits after what could be the last year of over 20% corporate growth, according to a recent research report put out by Citigroup.
Over a third of the fall came from stocks included in the Sensex’s 30 stocks, including Reliance Industries Ltd, Bharti and ICICI Bank Ltd.
While the Sensex fell 2.25%, the BSE Midcap Index (an index of companies with mid-sized market capitalization) closed .94% down and the BSE Smallcap Index closed 1.08% down.
The correction did not have anything to do with inflation either, which, remaining unchanged from the previous week at 6.09%, was also below the expected levels of 6.14%. However, it is still above the Reserve Bank of India’s target of 5-5.5%.
“We are comfortable with where inflation is right now, because we know that it will take a few weeks for it to start coming down,” said Ketan Karani, head of research at Kotak Securities.
Choksey said: “The Kharif crop will start coming in to the market in a few weeks, which will ease the supply situation today. Also, we are expecting good monsoons. That will also ease inflation.”
Still, inflation figures might have had a dragging effect on NSE’s Bank Index, which was down 2.18%.
While analysts said Friday’s fall was not connected to any broader trends in the market, Monday and the week ahead could see weak trading because the trading week will be interrupted by two holidays.
“The market will get support at 14,000 levels, we think. So this is a good technical correction,” said Harendra Kumar, head of research at ICICI Direct, an online brokerage.