The Hindu Business Line : Sensex sheds 112 as FIIs stay off

WITH foreign institutional investors (FIIs) turning net sellers and ahead of the corporate earnings season, the Indian equities markets went for a tailspin again on Monday as investors booked profits.

After a day of volatile trading, the Sensex shed 111.92 points to close at 6308.54. The Nifty remained choppy all day and by 1:30 p.m., it slipped below the 2000-level and was unable to claw back. At the end of the day, the 50-stock index lost 33.5 points and closed at 1982.

The markets were buoyed by the liquidity provided by FIIs, especially over the last few months. With the dollar strengthening and FIIs recasting investment strategies for 2005, there has been a dip in FII inflows. In fact, in the first six trading days of this month, FIIs have invested Rs 495.2 crore in equities.

Comparatively, in December 2004, FIIs had invested Rs 3,280.6 crore in the first six days alone, signalling the current drying up of dollar inflows to India to a trickle. FII inflows aggregated Rs 1,28,261 crore for December.

The fall in the markets for two consecutive days last week also weakened investor sentiment, according to analysts. Investors are booking profits as the market has suddenly changed gears from being confidently bullish to unpredictably volatile, said a Mumbai-based broker.

The start of the corporate earning seasons is also leaving the market jittery. Sensex heavyweight Infosys Technologies lost Rs 56.75, or 2.77 per cent of its value during today's trade on speculation that the company's result may fall short of market expectations.

Global markets have also had a weak opening with most eastern markets' indices closing lower.

In all, the Sensex has shed 343 points in the last four trading sessions and the Nifty has lost 121.75 points. This indicates an erosion of 5.15 per cent on the Sensex and 5.75 per cent on the Nifty in just four days.

Automobile, technology, pharmaceutical and banking sectors were the major losers of the day.

Tata Motors lost Rs 18.15 (3.68 per cent) to close at Rs 475.10. Scrips of Maruti also shed Rs 15.90 (3.62 per cent) and closed trade at Rs 423.75.

BSETECk, BSE's technology index, shed 2.32 per cent on Monday, with Wipro, Satyam and TCS, along with Infosys, losing ground.

Bank stocks have hit a roadblock of sorts after the Finance Minister's announcement that banking reforms would be announced shortly. Most public sector and private banks ended the day without any gains. ICICI Bank closed lower by Rs 10.30 at Rs 348.45. Similarly, SBI shed Rs 15.50 to close at Rs 599.70.

Most broking houses have asked their clients to book some profits on the day the market makes gains. "We also recommend selective buying on days like today," said a broker.

Though it has been well documented that the bull rally in December was largely due to FII inflows, investor sentiment was "irrationally" buoyed about valuations and corporate performance. The market is now checking this irrationality and taking a more cautious view towards corporate results and the subsequent valuations, said an analyst.

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