Mumbai: The BSE Sensex fell 1.1% on Thursday as investors locked in profits after a big rally that had taken the market to a 33-month high this week, but traders said the undertone was bullish on surging foreign interest.
Outsourcers such as Infosys Technologies and Tata Consultancy, which get more than half of their revenue from the United States, led the losses after data showed private sector employment in the world’s biggest economy surprisingly shrank in September.
Biocon Ltd rose 8.2% to an all-time high after ET NOW television reported India’s top listed biotechnology firm would outlicense its insulin portfolio for diabetes treatment to Pfizer. It ended up 5.7% up at Rs 402.25 after hitting 412.
“The opinions are sharply divided now. Some think the party will continue, while others think the party cannot continue when the market is approaching record high levels,” said Gajendra Nagpal, CEO at Unicon Financial Intermediaries.
“But I won’t read too much into it beyond a small correction. Even if a correction happens, that is only going to be temporary,” he said.
The 30-share BSE index closed down 1.11%, or 227.76 points, at 20,315.32, with 23 of its components falling.
The benchmark is up 16.3% in 2010, and is about 900 points away from a record high of 21,206.77. On Monday, the index had hit 20,706.74, its highest since January 2008.
The outlook for growth in Asia’s third-largest economy remain strong with the International Monetary Fund saying on Wednesday emerging economies were set to expand nearly three times faster than rich nations.
The IMF said India’s GDP would expand by 9.7% in 2010, up from 9.4% it had projected in July.
“The IMF forecast was good news, and foreigners are more gung ho than the domestic guys,” Nagpal said on the foreign fund inflows.
Foreign funds have poured more than $20 billion into Indian shares so far in 2010. They have been net buyers in all sessions since the start of September, with the investments since then totalling $7.5 billion.
“All of us expect there should be some pause in the market so that new funds can come in,” said K.K. Mital, head of portfolio management services at Globe Capital.
“If the fund inflows continue to be strong I don’t think we will see a sharp downturn. The overall economic growth momentum continues to be good and we may see upward revision in corporate earnings estimates in next few weeks.”
The quarterly earnings parade will begin next week with Infosys, India’s second-largest software services exporter, reporting on Oct. 15.
Infosys closed 1.5 percent lower at 3,055.25 rupees, while bigger rival Tata Consultancy fell 1.1 percent to 949.15 rupees. Goldman Sachs said on Thursday it downgraded Tata Consultancy to ”neutral” from ”buy” as the stock was expensive.
Mortgage lender Housing Development Finance Corp fell 2.5 percent, while ICICI Bank, the country’s second-biggest lender, lost 1.3 percent.
Top steelmaker Tata Steel fell 4.2 percent, the sharpest among the benchmark components, after rising nearly 30 percent since the beginning of September.
In the broader market, 1,822 losers led 1,194 gainers, while about 615 million shares changed hands on the BSE.
The broader 50-share NSE index was down 1.1 percent at 6,120.30.
Binani Industries rose 15.5% after it said it would acquire the entire public holding in its unit Binani Cement. Binani Cement closed 3.9% up.
Low-cost carrier SpiceJet rose nearly 6% before trimming gains to end 0.7% up. Sun TV founder Kalanithi Maran and his unlisted aviation firm Kal Airways Pvt Ltd bought 5 percent more in the carrier.