Mumbai: Indian shares erased early gains and fell 1.5% on Wednesday, extending losses into a second session, as a weak start to European markets doused risk-appetite and sparked profit-taking.
Energy giant Reliance Industries, outsourcer Infosys Technologies and private-sector lender ICICI Bank led the fall after they had climbed 10-15% over the past week.
The 30-share BSE index ended down 1.46%, or 219.37 points, at 14,843.12, with 26 stocks declining, after rallying as much as 2% at one stage.
The benchmark had shed 0.85% on Tuesday after rising 13.4% over the previous five sessions.
“Investors are taking up short positions, as there are no triggers for the market to go up in the short term,” Sonam Udasi, vice president of research at BRICS Securities, said.
“And valuations are not exactly cheap. Corporate results this quarter are not going to be anything extraordinary and there is no reason for us to trade at a premium.”
Wipro seesawed, retreating from gains of 2.7% to end down 1.5% at Rs451 after the no. 3 outsourcer reported a better-than-expected 12.8% rise in quarterly profit, but joined its bigger rivals in giving a cautious forecast due to uncertainty in the global economy.
Top power-equipment maker Bharat Heavy Electricals Ltd fell 2.9% to Rs2,150.90 after it reported a 23% rise in quarterly profit, but lagged forecasts.
Leading mortgage lender Housing Development Finance Corp fell 4.4% to Rs2,410.30 after its 20.7% rise in quarterly profit just managed to meet forecasts.
The BSE index has been riding a rally across global equity markets as a flurry of data signals the world economy is on the long road to recovery, spurred by low interest rates and hundreds of billions of dollars in stimulus spending by governments.
“India is playing to the tune of overseas markets, and short-term traders are making hay while the sun shines,” D.D. Sharma, vice president at Anand Rathi Securities, said.
Solid results from companies such as financial firm Goldman Sachs, chipmaker Intel, machinery maker Caterpillar and iPhone maker Apple have also underpinned the rise in equity markets.
The Indian market has outperformed most other major benchmark indexes during the recent rally, stoking concerns about rich valuations.
The BSE index trades at 17 times one-year forward earnings, outstripping benchmarks in other emerging markets such as Brazil, Thailand, South Korea and Indonesia that trade at a multiple of 11-13. Russia is at a forward multiple of just 7.1.
“Longer-term investors like domestic and foreign institutions are not buying at present. There is no reason for them to buy at these levels,” Sharma said.
“There is downside risk to the market.”
There are also worries a raft of equity sales to institutions could draw liquidity away from the stock market.
Analysts said even though the market looks overstretched in the short-term and may be vulnerable to profit-taking, long-term prospects still look bright if corporate results improve and economy growth picks up pace in the latter half of the year.
The Reserve Bank of India (RBI) is expected to hold key rates steady at its policy review next Tuesday as growth begins to show some signs of revival and concerns about rising prices are seen deterring further cuts, a Reuters poll showed.
Still, ICICI Bank fell 1.4% to Rs760.85, while no. 2 IT-services firm Infosys slid 1.2% to Rs1,919.20.
Reliance, India’s largest listed firm with the most weight in the main index, shed 2% to Rs1,977.30.
In the broader market, losers led gainers 1,388 to 1,244 on above-average volume of 464.1 million shares.
The 50-share NSE index fell 1.6% to 4,398.90.
Asian shares were mixed, with Japan’s Nikkei rising 0.7%, while MSCI’s measure of other Asian markets slipped 0.4%.
At 1039 GMT, the FTSEurofirst 300 index of top European shares was down 0.3%, after gaining for seven consecutive sessions.