Sensex ends below 27K, down 351 pts; FMCG drags, Infosys up

Bears remained in charge of Dalal Street for the second consecutive session on Wednesday as equity benchmarks lost more than 1.2 percent.

The 30-share BSE Sensex closed below the 27000-mark, down 351.18 points to 26837.20. The 50-share NSE Nifty plunged 101.35 points to 8135.10, dragged by FMCG, pharma, auto and select banks stocks.

The BSE Midcap and Smallcap indices were down 1.4 percent and 2 percent, respectively. About 608 shares advanced against 2125 shares declined on the Bombay Stock Exchange.

Investor sentiment continued to be fragile on RBI’s hawkish forecast indicating further rate cut may be delayed till next calendar year. Monsoon forecast downgrade, weak earnings growth in Q4FY15 and slowdown in services sector also fuelled fears of slow economic growth going ahead.

“Onus was now on the government to not resort to inflationary steps such as hiking crop support prices and look at solving India's structural inflation problem,” said Manish Singh, head of investment at Crossbridge Capital.

He feels equity markets could be in a sideways trend till the end of monsoon. Advising investors to not "commit fresh capital" to the market but also not indulge in panic selling, Singh said they were better off holding on to their investments in good quality companies.

Brokerage CLSA lowered its December 2015 Sensex target by 3 percent to 28,500, saying the prospects of a meaningful economic recovery in 2HFY16 are fading. The brokerage remains cautious near-term.

Meanwhile, HSBC India Services Business Activity Index fell below the crucial 50.0 threshold for the first time in 13 months, coming in at 49.6 in May from 52.4 in April.

“May data indicated that business conditions in the Indian service sector deteriorated. Both output and new orders contracted for the first time since April 2014, with some respondents indicating that the earthquake and extreme heat hampered demand. Inflationary pressures gained strength, with costs and charges rising at quicker rates,” HSBC India reasoned in its note.

Not just equities, money markets too were under pressure with the rupee breaching the 64-mark intraday on the back of strong buying of dollars by FIIs. However, the currency trimmed its losses in late trade, down  8 paise to end at 63.90 a dollar.

Cigarette major ITC tanked again, down 4.6 percent followed by ICICI Bank, State Bank of India, ONGC, Sun Pharma, HUL and Vedanta with 2-4 percent loss. Tata Power topped the selling list on Sensex, down 6 percent.

Tata Motors trimmed losses in late trade, down 2 percent after reporting lower Jaguar sales in May. However, Infosys gained 0.7 percent as media report suggested that the company set up a panel to oversee acquisitions and large investments. Coal India, TCS and Bharti Airtel gained 0.4-0.8 percent.

In the broader space, Adani Enterprises crashed 82.8 percent as Adani group unlocked value by demerging power, coal and transmission businesses. Unitech plunged 35.3 percent and Jaiprakash Associates lost 20.7 percent on talks of both companies defaulting on repayments to lenders but companies denied the same.

Shares of Nestle India cracked 9 percent as Maggi troubles continued. After market hours, health ministry said they banned Maggi for 15 days in Delhi and all noodle brands in market will be tested. Brokerages turned cautious on the stock. CLSA said the developments would have a negative impact on Nestle's near-term operational performance as Maggi noodles contribute over 20 percent to revenue.