Noon: Markets turn negative after rising 1.7%

Noon: Markets turn negative after rising 1.7%
PTI
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First Published: Thu, Jul 16 2009. 12 42 PM IST
Updated: Thu, Jul 16 2009. 12 42 PM IST
Mumbai: Indian shares erased gains of as much as 1.7% and turned briefly negative by late morning on Thursday as investors took profits on a 6.4% rise over the previous two sessions.
At 11:42am, the 30-share BSE index .BSESN was up 0.1% at 14,269.63 points, with 16 stocks gaining, after falling to as much as 14,248.01.
The 50-share NSE index .NSEI was flat at 4,233.50.
Markets were trading up 0.3% on Thursday as China’s economy grew faster than expected and fuelled risk-appetite across Asia, following a Wall Street rally overnight on strong US corporate earnings.
Leading engineering and construction firm Larsen & Toubro rose more than 1% after its quarterly profit tripled thanks to one-off exceptional gain.
Private-sector lender ICICI Bank and energy giant Reliance Industries were among the other major gainers.
“There is a lot of short-covering taking place, with the momentum overseas taking the market forward,” T.S. Harihar, senior vice president at ICICI Securities, said.
Sterlite Industries bucked the trend and fell 6% to Rs591 after the metals producer said it was raising about $1.5 billion in American Depositary Shares, with parent Vedanta to buy $500 million of the issue. The offering was priced at $12.15 each, a source said.
But analysts have warned any weakness in overseas markets could prompt profit-taking, with concerns about the domestic economy and rich valuations still not off the radar.
“It’s very difficult to sustain as we have not seen any major money coming into the cash market,” Harihar said.
“I don’t see any justification for valuations to get higher than what they are now.”
The benchmark index trades at 16.3 times one-year future earnings, higher than several other major emerging market indexes.
The market dropped 9.4% last week, its biggest fall in eight months, after the government’s budget offered little in terms of bold economic and financial reforms, but set a huge deficit of 6.8% of GDP, the highest in 16 years.
India’s wholesale price index (WPI) is forecast to have dropped 1.38% in the 12 months to 4 July, a smaller fall than the previous week after a fuel price rise, a Reuters poll of 11 analysts showed on Wednesday. The data is expected around midday.
Analysts and policy makers attribute the fall mainly to a statistical base effect because of a sharp acceleration in prices in 2008 and not to a sharp contraction in demand.
Larsen was up 1.1% at Rs1,446, while ICICI Bank rose 1.5% to Rs706.65.
Reliance, India’s largest-listed firm with the most weight in the main index, climbed 1.9% to Rs1,911.
In the broader market, gainers led losers 2 to 1 on relatively moderate volume of 144.4 million shares.
The 50-share NSE index was up 0.4% at 4,249.15.
Asian shares were higher, with Japan’s Nikkei up 0.6%, while MSCI’s measure of other Asian markets rose 1.3%.
China’s growth rate shot up 7.9% in the second quarter on the back of a surge in state spending and bank lending, and in Japan, a Reuters poll showed manufacturers’ confidence has improved for four months in a row as exports and industrial output picked up.
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First Published: Thu, Jul 16 2009. 12 42 PM IST
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