Mumbai: Shares fell 2% on Tuesday, but rallied by almost a half during April-June in their biggest quarterly gain in 17 years as investors rode on signs of an economic recovery and hopes for market-friendly policies.
The outlook for the coming quarter will depend upon how much Prime Minister Manmohan Singh’s ruling coalition lives up to market expectations for reforms such as further opening up the economy to foreign investors and stake sales in state companies.
Progress of annual monsoon rains, which provide a lifeline to India’s trillion-dollar economy, the Union Budget next Monday and quarterly company results in July should set the trend.
“Most positives are already factored in our prices, whereas disappointments are not. So, we don’t see much of upside from here,” said Ambareesh Baliga, vice-president of Karvy Stock Broking.
The 30-share BSE index jumped 49.3% in the three months to 30 June, behind only Vietnam in Asia that rose around 60% in the quarter.
It was the biggest rise for the benchmark since it soared 124.5% in the March quarter of 1992 when Manmohan Singh, who was then finance minister, kicked off economic reforms to open up the economy.
Energy giant Reliance Industries, which has the most weight in the index, fell 2.95% on Tuesday to Rs2,023.35, but leapt almost a third in the quarter.
Private-sector lender ICICI Bank shed 3.6% to Rs722, but more than doubled in April-June.
The index fell 1.97%, or 291.90 points, on Tuesday to 14,493.84 points, its biggest one-day percentage fall in nearly two weeks, as investors took profits ahead of the budget.
The benchmark shed 0.9% in June, its first monthly drop since February.
“Our understanding is that, in the July-September quarter, the market would be in a profit booking mode,” said Amitabh Chakraborty, president of equities at Religare Capital.
GMR Infrastructure, part of the group in the consortium building the New Delhi airport, called off a share sale on Tuesday because of poor investor demand even after slashing the size by four-fifths to $100 million.
Its shares fell 8.8% to Rs141.65.
Companies in India had launched on Monday share sales for nearly $2 billion, hoping the stock market rally would have revived investor appetite. [ID:nBOM344747]
In the broader market, losers outpaced gainers in the ratio of 2.4:1 on relatively heavy volume of nearly 500 million shares.
The 50-share NSE Index closed 2.27% lower at 4,291.10 points.