Mumbai: The BSE Sensex fell 1.8% on Friday and posted its biggest weekly fall in more than eight months as concern about the economy kept investors jittery, but Infosys bucked the trend and rallied on strong quarterly result.
Infosys Technologies, the country’s No. 2 outsourcer, reported a better-than-expected 17% rise in June quarter profit and marginally raised full-year forecast but warned the business environment was still challenging.
However, a poor start to monsoon rains, crucial for India’s domestic demand-led economy, and lingering concern about a world recovery weighed.
Listen to Mobis Philipose analyse the Infosys Q1 results
“I have been expecting a fall but not to this extent,” said Ambareesh Baliga, vice president, Karvy Stock Broking. “Some foreign funds were selling.”
Twenty-four index components ended down in choppy trade as a pullback of more than 1% at one stage triggered heavy profit-taking in the last half hour.
“The immediate reason for the fall is a sell-off by some hedge funds due to redemption pressures from their investors. The biggest worry for the market, apart from the monsoons, is the global economic crisis,” said R.K. Gupta, managing director, Taurus Mutual Fund.
The benchmark index lost 9.4% on the week in its sharpest fall since last 26 October, with Monday’s annual budget setting the trend as big government borrowing plans and few expected reforms disappointed investors.
“Now that the budget is over the market will come back to basics,” said Gaurav Dua, head of research at Sharekhan, adding traders and investors would be looking more closely at valuations.
The BSE index is still up 40% in 2009 after an almost 50% rally in the June quarter.
“Markets are going to be tentative next week on account of monsoons, quarterly earnings, global cues and most important foreign fund flows,” said Arun Kejriwal, director of research firm KRIS.
Farm minister Sharad Pawar told parliament on Friday the poor monsoon rains in northern parts of India were a serious problem.
Rains have been 8% below normal in early July, reviving after the driest June in 83 years, but water in the main reservoirs has more than halved, putting at risk even winter-sown oilseeds and wheat.
Higher than expected industrial output in May also failed to move the market, with traders shrugging it off as historical data.
Energy giant Reliance Industries, which led the index losers, fell nearly 4% to Rs1,778.40. The stock has fallen 12.3% this week, the second steepest weekly slide this year.
Infosys firmed 3% to Rs1,726.50 and spurred other outsourcers. Bigger rival Tata Consultancy Services rose 1.6% to Rs394.65, while No. 3 outsourcer Wipro Ltd gained 3.4% to Rs384.70.
In the broader market, losers outnumbered more than 2:1 on moderate volume of 333 million shares.
The 50-share NSE index, or Nifty, closed down 1.9% at 4,003.90 points.
“The market will be volatile next week, and the Nifty can fall below 3,800,” Gupta said.
STOCKS THAT MOVED
* Mahindra Satyam, formerly Satyam Computer Services, rose 2.05% to Rs74.50 after it said late on Thursday it had signed a 5-year multi-million dollar support contract with GlaxoSmithKline Plc.
* Punj Lloyd rose as much as 7% after its Singapore unit won projects worth $1.2 billion in Libya, but closed down 0.7% at Rs185 on profit-taking.
* Sterlite Industries rose 3.3% to Rs575.70 after its parent Vedanta Resources said it would begin bauxite mining for its alumina plant in eastern India in
October and would invest $1.2 billion to expand its capacity sixfold by 2011.