Mumbai: Indian shares snapped a two-day rise and fell 0.4% on Thursday as investors pocketed a portion of profits from a three-month rally that had boosted the main index more than 90%.
Outsourcer Infosys Technologies was targeted by sellers after the stock jumped by more than half since early March.
State-run explorer Oil and Natural Gas Corp and energy giant Reliance Industries, which had doubled over the past three months, also fell.
But private-sector lender HDFC Bank and top telecoms firm Bharti Airtel, which is in exclusive merger talks with South Africa’s MTN Group, bucked the trend and rose.
The 30-share BSE index ended down 0.36%, or 55.34 points, at 15,411.47, with 19 stocks declining, after a choppy trading session in which the benchmark fell as much as 1.5% and rose 0.7% at one stage. The 50-share NSE index fell 0.4% at 4,637.70.
“After a strong rise in shares recently, a correction in the market is very healthy,” Gaurav Dua, head of research at Sharekhan Securities, said.
“This kind of movement in the market could continue at least till the budget is presented.”
More than $7 billion in foreign investors’ money have poured into the market since early March, boosting the benchmark by 60% since the start of the year, after it slumped by more than half in 2008 when foreign funds pulled out $13 billion.
The ruling coalition, which won a stronger mandate last month, is expected to pursue pro-market reforms in the annual budget in early July.
Stake sales in state companies and relaxation of foreign investment rules in the insurance and pension sectors are some of the reforms expected.
The market has leapt 91.5% from 2009 lows in early March, but rising valuations, a lack of clarity on the outlook for corporate earnings growth, slow implementation of reforms and a burgeoning fiscal deficit are concerns.
Finance minister Pranab Mukherjee said on Thursday the government would explore ways of bringing the economy back to higher growth path without increasing the fiscal deficit.
Annual inflation was at 0.13% on 30 May, a record low since annual data was published from 1977/78, and could turn negative due to a statistical high base a year ago, but rising prices of oil and other commodities could reverse the tide later.
The central bank is close to the end of its easing cycle, Citigroup Global Market said in a note on Wednesday.
No. 2 IT-services firm Infosys fell 2.9% to Rs1,751.55 while government-run State Bank of India dropped 3.4% to Rs1,696.25.
ONGC shed 4% to Rs1,117.90 and Reliance Industries, which has the most weight in the main index, eased 0.9% to Rs2,299.75.
Satyam Computer jumped 10%, its daily limit, for the third consecutive day after the fraud-tainted outsourcer on Tuesday released figures showing it stayed profitable. The stock rose Rs7.35 to Rs80.85.
The sharp spike means the firm’s new parent, Tech Mahindra will likely need a second preferential issue to gain a majority stake in the company.
Meanwhile, UltraTech Cement fell 3.7% to Rs735.20 after Larsen & Toubro sold its entire 11.5% holding in the firm for about Rs10,400 crore.
Investors who had bought shares at low levels will be tempted to take profits at almost every rise, but there are others who are buying on hopes the budget will throw up pro-market reforms, Hitesh Agrawal, head of research at Angel Stock Broking, said.
“This situation where there are profit-takers and buyers at the same time is creating a pull and push state between the bulls and the bears,” he said.
Bharti, which added 2.81 million mobile users in May taking its total to 99.5 million, rose 2.3% to Rs854.60. HDFC Bank gained 3.9% to Rs1,551.75.
In the broader section, losers led gainers by almost 2 to 1 on relatively heavy volume of 554.4 million shares.