Profit booking drags Sensex down by 563 pts in 2 days

Equity benchmarks have seen heavy profit booking since yesterday and wiped out nearly 563 points in two days after the 485 points surge on Wednesday. The Nifty has been seeing selling pressure whenever it starts inching towards its all-time high.

The rally is driven by liquidity and at some point of time people would be finding it a bit expensive. They would be pulling out liquidity and I think that's exactly what is happening right now. Even after the sort of results which we are seeing for Axis and Infosys, if the stocks are to come down it is very clear that the best is priced in," he explained.

"Again we are close to that band of 6070-6120, and in case we break that then there is some more trouble for us," he said.

The sell-off across all sectors brought the index down to settle down below 6100 after hitting a weekly high of 6284.10. The profit booking seen may be attributed to the upcoming Rs 15,000 crore Coal India issue, which is set to open on Monday, October 18 for subscription.

The beginning of the earnings season for the quarter ended September 2010 was good. India's second largest IT services exporter Infosys Technologies and third largest private sector bank by market cap Axis Bank reported better-than-expected numbers. However, these stocks already discounted these numbers as they had rallied sharply ahead of earnings; Infosys surged 9% in last one month.

The IT bellwether reported 16.73% jump in net profit of Rs 1737 crore and 12.08% rise in net sales of Rs 6947 crore on QoQ basis. However, Expected revenues at Rs 6775.66 crore and net profit at Rs 1718.11 crore. But the market could slightly be disappointed with the rupee guidance; the company expects FY11 EPS at around Rs 115.07-117.07 while in previous quarter it had expected FY11 EPS at Rs 112.21-116.73/share. Rupee appreciation might be the reason as foreign institutional investors have pumped in more than Rs 1 lakh crore in 2010 and they were net buyers to the tune of more than Rs 43,000 crore since September 2010.

Infosys is concerned about maintaining a healthy operating profit margin (OPM) due to currency headwinds, volatility in the markets and global uncertainties.

Moshe Katri, MD, Cowen and Company said that fundamentals will remain healthy for Infosys. ?Infosys numbers will continue to gradually move higher,? he added. He also said that any upgrade on the company will be decided upon the currency trends.

TCS, Infosys and Wipro plunged 3.5% each; the BSE IT Index slipped 3.25%. Bharti Airtel from telecom pack declined 3.3% and Reliance Communications was down 2.6%.

The 30-share BSE Sensex closed at 20,125.05, down 372.59 points or 1.82% and the 50-share NSE Nifty fell 114.70 points or 1.86% to settle at 6,062.65.

Heavyweight Reliance Industries went down 1.76% and ONGC down 1%. BPCL plunged 3.9% while Cairn India rose 0.2%. ACC and Ambuja Cements were down 2% each. In metal space, SAIL, Tata Steel and Sterlite Industries lost 2-2.5%; Hindalco and Jindal Steel were down 1-1.5%.

Shares of India's largest bank - SBI tanked 3% and Axis Bank went down 4%. HDFC Bank, ICICI Bank, Kotak Mahindra Bank, PNB and IDFC slipped 1.2-1.8%; HDFC fell 0.85%. DLF from realty pack fell 2.7%. In auto pack, Tata Motors, Maruti and Hero Honda were down 2.3-3.9%. M&M and Bajaj Auto declined 1% each.

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