Mumbai: The BSE Sensex shed 0.6% on Tuesday after Asian stocks surrendered early gains, shrugging off the US Federal Reserve’s comments it was likely to keep interest rates at very low levels for some time.
Index heavyweights ICICI Bank and Reliance Industries led the fall, as investors locked in profits after a recent rally.
At 12:30pm, the main 30-share BSE index was trading down 0.58% at 16,933.88, with 23 of its components losing ground. The 50-share NSE index was down 0.62% at 5,026.70.
ICICI dropped 1.9% to 901.80 rupees after the stock had risen more than 16% this month.
”These kind of short-term corrections are bound to happen in a market which has risen so much and so fast this year, and it’s healthy for the overall market,” said K.K. Mital, head of portfolio management services at Globe Capital.
The BSE index is up more than three-quarters this year, mainly helped by foreign fund inflows of nearly $15 billion.
“Any downside should be used as buying opportunities as liquidity flow continues to be strong,” Mital said. ”I don’t expect the market to drop sharply from these levels.”
Reliance Industries was down 0.8% at Rs2,130. The energy giant told shareholders at an annual meeting the company was planning an aggressive exploration campaign over three years.
The market had opened up 0.1% following a Wall Street rally after Fed chairman Ben Bernanke reinforced expectations that interest rates would stay low to spur growth.
Bernanke acknowledged in a speech that the dollar’s slump was raising some prices but said other factors restraining inflation were winning the day, helping reinforce the market’s already benign view toward US interest rates.
His remarks and better-than-expected US retail sales data fueled broad gains on Wall Street, with the Dow Jones industrial average rising 1.3% and the S&P 500 climbing 1.5%.
Asian stocks edged lower after hitting 15-month highs, with the MSCI’s measure of regional markets other than Japan down 0.5% and Japan’s Nikkei falling 0.6% by 12:04pm.
Export-driven software stocks such as Infosys Technologies rose 1.9% to 2,394 rupees and Tata Consultancy Services was up 2.4% at 681.95 rupees on hopes of a pick in outsourcing demand early next year, traders said.
In the broader market, 1,462 losers led 1,121 gainers on volume of 169 million shares.