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Tuesday, May 26, 2009

FIs find blue chips expensive, drive down Sensex 324 pts

INDIA WORST PERFORMER IN ASIA; FOREIGN FUNDS DUMP RS 200-CR SHARES

Banking, real estate, and capital good shares were among the worst performers, with the respective sectoral indices on BSE falling between 3% and 4%. Brokers feel banking shares could recover, as they do not appear expensive despite the recent rally.


    KEY equity benchmarks slumped on Tuesday, as institutional investors dumped frontline shares, considering them as being expensive at these levels. Brokers said many traders unwound their long positions in the derivatives segment ahead of the expiry on Thursday, as they do not expect big gains in the near future. India was the worst performer in Asia, where key markets fell between 1% and 2% on concerns over North Korea's missile plans.
    According to provisional data, foreign funds net sold shares worth close to Rs 200 crore while local institutions net sold shares worth Rs 138 crore.
    "For the market to remain at the current levels or go further higher, the economy, investment activities and various asset markets must show accelerating growth trends. Despite all the optimism with the clean mandate for the new government and dip in the global risk aversion, this recovery is not given,"
said a note by brokerage house Credit Suisse.
Economic data from the US remained mixed. Confidence among US consumers, as reflected by the Conference Board's sentiment index, jumped 54.9, the highest level since September, reflecting expectations of an improvement in the job market. But another report showed that house prices in 20 US cities have declined more than feared.
    Back home, the 30-share Sensex closed at 13589.23, down 324 points, or 2.3%, over the previous close. The 50-share Nifty fell 120.85 points, or nearly 3%, to end the day at 4116.70. The steep fall prompted many investors to book profits in their mid and small-cap shares, which have risen sharply in the past couple of weeks. The BSE Mid and small-cap indices fell over 3%.
    "The market is in a correction mode, though it is not likely to stretch deep," said Max New York Life Insurance head of investments Prashant Sharma. "There will be huge buying interest from foreign investors when the market corrects 15-20% from last week's highs. Investors can invest with a long-term horizon in key sectors such as banking and infrastructure," he added.
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