Correction in bull mkt: Sensex erases gains made post state election results

11: 45 am The BSE Sensex and the NSE Niftyfell for a fourth consecutive day. Rate sensitive stocks slump after sharply higher food prices drove up retail inflation to 11.24 percent in November raising expectations of a rate hike by the central bank when it meets on December 18 for monetary policy review.

It seems the Indian equity markets have wiped out the gains made post election results.

The BSE Sensex rallied over 300 points post election results on Monday to hit its fresh all-time record high of 21,483.74 after the main opposition party, the Bhartiya Janata Party (BJP), performed strongly, securing an absolute majority in three out of the four states.

Today, however, the BSE Sensex is down167 points at 20753 while NSE Nifty is down 56 points at 6180.

The index has lost around 700 points in a matter of three sessions from its record high levels.

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Most experts believe market is likely to consolidate in the near term, at least till March; and then it should be able to resume its uptrend till December and until some clarity emerges on general elections.

Raamdeo Agrawal, Joint MD, Motilal Oswal Financial Services, believes the current down-move in stocks is a classic correction usually seen in an ongoing bull market.

“he built-up to the mini-election of December 8 and the results, which turned out to be far better and far more dramatic gave it a positive wave. But clearly a lot of people had built lot of profits so my sense is that this is more of a correction from that and now we have some [negative] news both global and local in nature,” he told CNBC-TV18.

9:30 am****Weak IIP, high inflation drag Sensex 150 pts down; banks slump

The market fell further in early trade on last trading day of the week, following the weak IIP numbers and high inflation numbers announced yesterday.

The Sensex lost 154.80 points or 0.74 percent to 20,770.81, and the Nifty fell 51.55 points or 0.83percentto 6,185.50.

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It was a double whammy for the economy on Thursday evening- industrial production contracted by nearly 2 percentin October and retail inflation for November jumped to over 11 percent that dampenedhopes of a turnaround in the economy.

RBI governor says retail inflation is beyond the central bank’s comfort zoneas a rate hike next week looks inevitable.

Indian rupee opened lower by 29 paise at 62.10 against the US dollar on Friday versus previous day’s closing value of 61.81 per dollar.

According to Rohini Malkani of Citigroup, consumer price index at 11.2 percent exceeds RBI’s baseline estimates. She expects the central bank to hike the repo rate by 25 basis points in its policy on December 18.

She also expects the repo rate to stabilise at 8 percent until more clarity emerges on the monetary policy framework from the Urjit Patel committee report. “We do not expect much comfort from November WPI, pegging it close to 7.2 percent,” Malkani adds.

The global mood is cautious.Asian markets are mixed on uncertainty over timing of scaling back fiscal stimulus by Federal Reserve.US markets slipped for the third session with the Dow closing down 100 points while European markets too feel the heatfalling between 0.4-1 percent onThursday.

Indian shares are forecast to scale new highs next year after elections, attracting offshore funds despite an expected rough period for emerging markets when the US Federal Reserve shifts monetary policy, a Reuters poll showed.

The poll predicts a better performance than this year’s 9 percent increase but far more modest than the 25 percent surge in 2012 when foreign investors bought a massive USD 24.4 billion worth of Indian stocks. The consensus of 21 strategists and brokerages polled Dec 4-11 put the index at 22,625 by the middle of next year and an all-time high of 24,000 by year-end, a gain of just over 13 percent from Wednesday’s close of 21,171.41.

Stocks in news:

ICICI Bank is the biggest loser, falling 3 percent on rate hike fears followed by BHEL with a 2.4 percent loss.Index heavyweights Reliance Industries , ITC , HDFC and Larsen and Toubro slipped 1-1.5 percent. However, Tata Motors and Bharti Airtel gained 1.7 percent each, rebounding after three-day fall. IT and pharma stocks too gained on fall in rupee.