Profit booking snaps rally; Sensex ends 5% lower

MUMBAI: The pull-back rally that began two weeks back came to an end Wednesday as traders booked profits. The global markets once again faced the gloomy reality of recessionary pressure after the US presidential elections were over.
Bombay Stock Exchange’s Sensex closed at 10,120.01, down 511.11 points or 4.81 per cent from the previous close. The index touched an intra-day low of 10,051.52 and high of 10,945.41. It was 50 points short on either side of breaching the psychological levels 10,000 and 11,000. National Stock Exchange’s Nifty ended below crucial support of 3000. The index fell 4.68 per cent or 147.15 points to close at 2,994.95. It touched an intra-day low of 2971. The indices have gained over 40 per cent since the lows of Oct. 27. “Global markets gained momentum in last six days. We are in the middle of bear market rally and a correction was on expected lines. Market will remain in a trading zone unless it crosses 10,800 on the Sensex. On the down side, 2250 level on Nifty seems unlikely to be broken,” said Manish Sonthalia, vice president, equity-strategy, Motilal Oswal. One of the reasons for the sharp correction was the fall in Reliance Industries. The oil & gas major, which holds 15 per cent weight in the Sensex, ended 12.76 per cent lower. The index heavyweight fell on reports that it has shut down five polyester units at its Patalganga plant soon after offering exit option to it employees. “The correction in Reliance Industries was mainly on account of fall in petrochem product prices which have declined 20-40 per cent in the past four months. Any fall in petrochem prices results in equivalent drop in EBITDA margins. GAIL also bore the brunt (down 15%),” Sonthalia said. Secondline stocks, however, fared better than their larger brethren. BSE Midcap Index ended 1.5 per cent lower and BSE Smallcap Index declined 1.74 per cent. Tata Steel (-10.05%), Reliance Communications (-9.5%), DLF (-8.79%), Jaiprakash Associates (-10.01%) and HDFC (-8.63%) were also badly beaten. Wipro (2.72%), Satyam Computer (0.27%) and Maruti Suzuki (0.08%) managed to end with gains. Amongst the sectoral indices, BSE Oil&Gas Index ended 9.44 per cent lower, BSE Metal Index slumped 6.88 per cent and BSE Realty Index declined 5.64 per cent. Market breadth, which was extremely strong at open, turned weak as profit booking set in. On BSE, 1,565 declines outnumbered 1,000 advances. Meanwhile, rally in European markets was arrested as economic problems took centrestage. FTSE 100 was down 1.82 per cent, DAX 30 declined 1.16 per cent and CAC 40 fell 2.25 per cent. In the US, stock futures dropped as traders focused on the deteriorating economy that newly elected president Barack Obama will have to take care of. Dow Jones futures were down 0.54 per cent, S&P 500 futures fell 0.75 per cent and Nasdaq futures declined 0.58 per cent.