Mumbai: Indian shares ran out of steam after climbing to a near six-week high on Wednesday and shed 0.2%, with Housing Development Finance Corp leading the drop.
Traders said there was resistance after the market had risen 3.4% over two days, and with the year end coming up investors were becoming cautious.
Reliance Infrastructure fell 1.9% to Rs1,060.55 as investors took profits after the stock had jumped 4.5% over three sessions.
Top vehicles maker Tata Motors touched an 18-month high of Rs739.45, after its November sales rose 65% from a year earlier.
The stock closed up 4.1% at Rs729.75 rupees. Citigroup said in a note on Sunday Tata Motors would be a key beneficiary of a revival in the domestic investment cycle.
The 30-share BSE index closed down 0.16%, or 28.36 points, at 17,169.91 after rising as much as 0.8% in early deals. The 50-share NSE index closed almost unchanged at 5,123.25.
The market had risen over the previous days on better-than-expected September quarter GDP growth and robust November auto sales. Eighteen of its components closed in the red.
Foreign fund inflows of more than $15 billion have powered a rally of 78% in the benchmark so far this year.
If the rally sustains momentum, the Sensex is poised to post its best yearly performance at least since 1991, according to data available with Thomson Reuters.
Analysts are mixed on the outlook for the new year.
Rakesh Rawal, head of private wealth management at Anand Rathi Financial Services, said he expected the Sensex to gain around 15% in 2010.
“The extent of negativities in the world markets may come off in 2010. If that happens, it could help the Sensex grow further. It can grow by ... maybe even 25%,” he said.
But Anand Shah, head of equities at Canara Robecco Mutual Fund, was skeptic.
“Our market could be really choppy in 2010. Strong liquidity will keep pushing the market higher but weak global fundamentals will not support the idea. How much can printed money drive a market,” he said.
Housing Development Finance dropped 1.9% to Rs2,748.80 on investor worry a loan product it launched at a fixed rate of 8.25% a year up to March 2012 and the applicable floating rate for the remaining term would hit margins.
“The dual rate product introduced by HDFC implies lower interest rates, and could pressurise its margins to an extent,” said Vaibhav Agrawal, vice-president of research - banking at Angel Broking.
Leading lenders State Bank of India and ICICI Bank climbed 0.7% each.
“Banks look better than rest of the lot. The valuations are still reasonable. The outlook looks better, with the economy showing good growth,” Shah said.
India’s central bank will not raise interest rates by the end of 2009, according to a new Reuters poll, and only one-third of economists surveyed predict a rate hike by the end of January despite unexpectedly strong growth during the September quarter.
Strong monthly sales also pushed Maruti Suzuki and Bajaj Auto up 1.5% and 3.3% respectively.
Top engineering and construction firm Larsen & Toubro shed 0.4% to Rs1,622.15, after the government rejected its proposed tie-up with Europe’s EADS for defence equipment production.
Tata Steel, the world’s eighth largest steel maker by output, dropped 1.1% to Rs575.40 on concerns over its near-term outlook.
“The short-term outlook for Tata Steel remains challenging, due to the presently lower demand in the European steel markets, subdued steel prices, and Corus’ production cuts,” First Global said in a note on Tuesday.
In the broader market, gainers led losers in a ratio of 1.2:1 on moderate volume of 442 million shares.