Profit booking derails rail stocks

On the fast track ahead of Thursday’s Union Budget, the stock markets jerked to a halt on Tuesday with both benchmark indices — the BSE Sensex and the NSE Nifty — correcting heavily.

According to analysts, the fall was mainly due to global events and profit booking. However, the missing feel-good factor in the Railway Budget aggravated the decline, they added.

The Sensex shed over 518 points or 2 per cent to close at 25,582, while the Nifty ended at 7,623, down 164 points or 2 per cent from its previous close.

On the BSE, realty, power and capital goods led the bloodbath with their sectoral indices closing lower by 7.16 per cent, 6.37 per cent and 4.80 per cent, respectively.

Broad decline

There were more than two losers for every gainer on the BSE. The BSE mid-cap and small-cap indices, too, dropped 3.63 per cent and 4 per cent, respectively.

According to Alex Mathews, Head of Research, Geojit BNP Paribas Financial Services, the fear of increasing interest rates in the US and European markets leading to a weaker currency gripped investors. This, coupled with FIIs turning net sellers in the F&O market and profit booking, contributed to the fall. “Profit booking in rail stocks spread to frontline stocks and the Nifty falling to below 7,700 levels created fresh short positions,” he added.

Motilal Oswal, Chairman and Managing Director of Motilal Oswal Financial Services, said: “Many high beta stocks had rallied to exponential levels and a healthy correction was in order. The market had entered the over-bought stage. This, coupled with weakness in the European market and mild disappointment over the Budget could have made markets nervous.”

Scrips of several companies catering to the railway sector, which had rallied sharply earlier, fell 20 per cent over profit-booking as the Rail Budget was being presented.

Texmaco Rail & Engineering tumbled 19.84 per cent, while BEML dropped 5 per cent on the BSE. Shares of Kalindee Rail Nirman lost 4.99 per cent, Titagarh Wagons (4.99 per cent), Kernex Microsystems (4.94 per cent), Hind Rectifiers (4.94 per cent) and Stone India (4.91 per cent).

(This article was published on July 8, 2014)
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