Mumbai: India’s main stock index bounced 1.8% in choppy trade on Friday, but the rear-guard rise was not sufficient to extend a run of 14 weekly gains as investors grabbed profits after a three-month rally.
Renewed jitters about the global economy and worries about expensive valuations after a 90% jump since early March eclipsed the market this week. Still, long-term investors were buyers as prices dropped.
“The market can’t keep going up in a straight line all the time. This kind of fall was bound to happen,” V P Chaturvedi, who helps manage $5 billion at Tata Asset Management, said.
The main index dropped 4.7% on the week, after rallying 83% over 14 consecutive weeks in its best run in four years.
“It gives the opportunity for new investors to come in. There is still a lot of interest in the market,” Chaturvedi said.
Energy giant Reliance Industries pulled back after falling in the previous four sessions following an unfavourable court ruling on gas supplies.
The stock ended the week down 13.5%, leading losses in the main index.
Outsourcer Infosys Technolgies gained 2.9% and engineering and construction firm Larsen & Toubro, which fell 13.4% from last Wednesday through the previous session, rose 5.7% on Friday.
Reliance Infrastructure added 5.1% after the Economic Times newspaper said its consortium with Hyundai Engineering was tipped to bag a contract worth about Rs1,500 crore ($310.7 million) to construct the second leg of a highway project connecting Mumbai’s suburbs to the city.
The Business Standard reported Reliance Infrastructure had also started negotiating with domestic banks to tie up funds for the second phase of Mumbai’s metro rail project, though it was yet to win the contract. The stock ended the week up 7.1%.
The order books of the company and firms such as Larsen & Toubro are expected to get a boost as the government steps up spending to revamp the country’s ramshackle infrastructure.
The 30-share BSE index ended up 256.36 points at 14,521.89, with 24 stocks advancing. It had leapt 94% from a 2009 low in early March to its highest level in almost a year last Friday. The 50-share NSE index rose 1.5%to 4,313.60.
Most of the gains can be attributed to foreign funds, which pumped almost $8 billion into the market since mid-March on signs of an economic rebound.
A stronger mandate for the ruling coalition at the end of elections last month has raised hopes the government, free from its former communist allies, will pursue reforms such as privatisations and relaxation of foreign investment rules.
Investors are, however, awaiting the budget on 6 July a clearer picture of the government’s plans to push up economic growth and tackle a yawning fiscal deficit.
Trading could be choppy next week as investors will look to take profits if prices move up, analysts said.
“The extreme short-term indicators signal the market is in oversold territory. But the longer-term indicators signal more of a correction may be coming up,” Alex Mathew, head of research at Geojit BNP-Paribas Financial Services, said from Kollam in the southern state of Kerala.
“Today may turn out to be just a temporary pull-back, and the market could consolidate further before the budget.”
Reliance Industries, which has the most weight in the main index, rose 0.7% to Rs2,039.60, while No. 2 outsourcer Infosys gained Rs49.65 to Rs1,771.10.
Larsen climbed Rs80.8, to Rs1,496.10, and Reliance Infrastructure advanced 61 rupees to Rs1,262.25.
Leading listed realty firm DLF Ltd, which had more than tripled from 6 March through early June, shed more than 10% this week.
Non-ferrous metals producer Sterlite Industries was another major loser, falling 15.5% on the week as copper prices weakened.
In the broader section on Friday, gainers led losers 1,351 to 1,305 on relatively heavy volume of 503.9 million shares.