Sensex falls 246 pts, shuts sub 21000 on taper fears

Moneycontrol Bureau

The 30-share BSE benchmark fell below the 21,000-mark for the first time in last four sessions, tracking weakness across the globe on Fed tapering woes.

The market fell for the third consecutive session today, especially after it touched new highs on Monday. The Sensex fell 245.80 points or 1.16 percent to 20,925.61, and the Nifty declined 70.85 points or 1.12 percent to 6,237.05.

Investors will remain worried till the direction from RBI policy and Federal meeting due next week; hence, the new highs are unlikely in near term, feel experts.

Andrew Holland of Ambit Investment Advisors does not see market making new highs. He expects the Nifty to move towards 6000 level by month-end.

Fed tapering?

Market experts believe the consistent improvement in financial parameters may compel Federal Reserve to think of reducing monthly fiscal stimulus or give strong hint of tapering in its forthcoming policy meeting that is scheduled on December 17-18.

“Tapering will happen if not in December then definitely January,” Andrew Holland said.

Meanwhile, Nirmal Bang believes the Fed is set to roll out a mild tapering to the tune of USD 5-10 billion from its current monthly purchase of USD 85 billion in its December meeting. “In order to reaffirm the markets on its pledge to keep the federal fund rate low for an extended period of time, the Fed may even lower the unemployment threshold of 6.5 percent at which it could consider raising interest rates,” the Nirmal Bang report said.

Economic data

Back home, industrial output data, which was announced after market hours, has seen contraction at 1.8 percent in October as against a growth of 2 percent last month. Even consumer price index inflation disappointed the street, rising higher-than-expected to 11.24 percent in November compared to 10.09 percent in previous month. Analysts had expected industrial output at minus 1.2 percent and inflation at 10.1 percent.

These are important indicators for the Reserve Bank of India to determine monetary policy.

Stocks specific action

It was majorly a broadbased selling in the market today with the BSE Auto, Bank, Metal, Oil and Gas and Capital Goods indices falling between 1-2 percent.

Tata Motors fell for the third straight day today, falling 4.5 percent on top of a 3 percent loss in earlier session after Jaguar Land Rover raised its capex guidance to GBP 3.5-3.7 billion for FY15.

FY15 capex guidance poses a risk of negative free cash generation for Tata Motors, says Barclays in its report. The brokerage house cut target price on the stock to Rs 407 from Rs 431 apiece.

Bajaj Auto, which was also on broker’s radar, fell 2 percent. Bank of America Merrill Lynch downgraded the stock to neutral from buy and also cut target price by 13 percent Rs 2,100 from Rs 2,425 apiece.

Among others, shares of ICICI Bank, ITC, Reliance Industries, TCS, ONGC, Larsen and Toubro, Bharti Airtel and State Bank of India lost between 1-3 percent.

However, Tata Power bucked the trend, gaining nearly 4 percent followed by HDFC with a 1 percent gain.

Among midcaps and smallcaps, SKS Microfinance gained 3 percent as micro finance lender completed its Rs 80.81 crore worth securitisation.

Tata Teleservices surged over 7 percent on a media report that Tata group will inject Rs 4,000 crore in the company while Cadila Healthcare rose 2.65 percent on settlement of suit with Warner Chilcott.

However, Kingfisher Airlines plunged 6.5 percent as a media reports suggested that Karnataka High Court has allowed banks to take possession of Kingfisher House in Mumbai.

UB group stocks remained in focus today as well. UB Holdings rose 1.4 percent and United Breweries gained nearly 3 percent on source-based reports that Heineken, the largest shareholder in United Breweries (UB), has offered to buy UB group's stake in UB.

Meanwhile, the domestic currency too saw depreciation on weakness in equity markets. The rupee fell 57 paise to close at 61.85 against the US dollar.

On the global front, Asian markets closed lower with the Nikkei falling more than 1 percent while European markets were trading at two-month low at 17 hours IST.