Mumbai: Indian shares paused on Thursday after a poor start for European peers sparked profit-booking on a 6.4% jump in the market over the past two sessions.
The main index had initially gained 1.7% as China’s economy grew faster than expected and fuelled risk-appetite across Asia, but analysts said pricey shares after a 77% jump since early March made investors wary.
“We saw some short covering, but later investors wanted to liquidate their positions in select stocks as there was selling pressure,” Sunil Pachisia, vice president at brokerage Pratibhuti Viniyog, said.
“We could see this trend continuing for the next few days until new longer-term players enter the market at lower levels.”
Leading engineering and construction firm Larsen & Toubro fell 3.7% to Rs1,378 after its quarterly net sales lagged estimates, even as profit tripled thanks to an one-off exceptional gain.
New orders in the three months to June fell more than a fifth and demand was likely to remain slow for at least another quarter. Revenue at its machinery and industrial products segment fell, while electrical and electronics segment sales were flat.
“The stock is expensive and its upside now looks capped. Every rise will be treated with profit-booking,” said an analyst at SBI Capital Markets.
Sterlite Industries shed 6.1% to Rs590.15 after it priced an issue of American Depositary Shares at 6 percent below its Wednesday closing share price on the New York Stock Exchange.
The company raised about $1.5 billion, with parent Vedanta buying $500 million of the issue.
The 30-share BSE index ended down 0.02%, or 2.99 points, at 14,250.25, with 16 stocks declining.
In the broader market, gainers led losers 1,481 to 1,134 on relatively moderate volume of 421.8 million shares. The 50-share NSE index closed flat at 4,231.40.
Equities worldwide have been buoyed over the past few days on upbeat US corporate earnings and stronger signals the turmoil in the global economy was abating.
But analysts warned any weakness in overseas markets could prompt profit-taking in India on concerns about the domestic economy and weak corporate results.
Asia’s third-largest economy is expected to post its weakest performance in seven years in 2009/10. Analysts in a Reuters poll this week projected growth at 6.3 percent, below last fiscal year’s 6.7%.
“It’s very difficult to sustain as we have not seen any major money coming into the cash market,” T S Harihar, senior vice president at ICICI Securities, said.
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.
The government ramped up its borrowing plan by nearly a quarter for the fiscal first half to September to bridge its growing budget deficit.
Wholesale prices fell a smaller-than-expected 1.21% in the 12 months to 4 July, compared with the previous week’s annual decline of 1.55%, government data showed on Thursday.
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.
Asian shares rose on Thursday, with Japan’s Nikkei gaining 0.8%, while MSCI’s measure of other Asian markets was up 0.9%.
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.