Mumbai: Indian shares tested fresh 25-month highs on Tuesday but pared most of their early gains to close barely changed, even as world stocks edged up, on resistance after the recent steep rally
Outsourcers, which reap a major chunk of their revenue from exports, were weighed down by the rupee that scaled a 19-month-high against the dollar and looked to appreciate more, which could squeeze profit margins of the companies.
The main stock index rose 6.7% in March and has already added 2.4% in April.
The 30-share BSE index closed 0.03%, or 5.69 points, higher to finish at 17,941.37, with 16 of its components closing in the green. The 50-share NSE index closed 0.04% lower at 5,366 points.
Earlier in the session, it rose to as much as 17,991.41 -- its highest since 27 February, 2008.
Investors also locked in some gains after the recent steep rise, dealers said.
“Results should provide the next trigger. Companies are moving more and more towards profitability,” said Rakesh Rawal, head of private wealth management at Anand Rathi.
Robust corporate advance tax figures last month have spurred expectations of profit growth when companies start reporting their March quarter results next week.
“Managements will deliver profit increases. They have the opportunity and the environment to do so.” said Rawal.
Rawal ruled out a steep downside in the market in the near term unless the global scenario turned adverse.
Foreign funds have poured a net $4.7 billion into Indian stocks so far in 2010, of which around $4.4 billion arrived in March alone. A part of these flows were absorbed by primary market offerings.
Deutsche Bank set an annual 2010 target for Sensex at 22,000 points.
“Although our target multiple seems steep, strong economic recovery should drive robust earnings upgrades leading to mid-cycle valuations,” Deutsche Bank analysts said in a note.
Top outsourcer Tata Consultancy Services shed nearly 1% and rivals Infosys Technologies and Wipro dropped 0.9% and 0.8%, respectively.
Financials closed mixed. Near-term concerns about rising inflation weighed but the long-term prospects looked optimistic on the back of robust economic growth.
Leading private lender ICICI Bank and mortgage lender Housing Development Finance Corp both rose more than a%.
Top lender State Bank of India dropped 0.6%.
Top power equipment maker Bharat heavy Electricals gained 2.8% to close at Rs2,528.60.
In a note released on Monday, Deutsche Bank said operating leverage benefits should drive up margins for the company in fiscal year 2011, while the benefits of pricing could raise margins in fiscal year 2012.
Energy giant Reliance Industries, which has the highest weight on the Sensex, declined 0.4% to Rs1,121.15. It had risen 4.7% over the two previous sessions.
In the broader market, gainers outnumbered losers in a ratio of 1.5:1. Around 509 million shares were traded on the BSE, higher than Monday’s volume.