Sensex drops 120 points; HUL, GAIL biggest losers

The BSE Sensex dropped 120 points to end the day below the 20,000-mark after FMGC major Hindustan Unilever came out with a disappointing set of third quarter earnings.

The NSE benchmark Nifty closed down 33.80 points at 6048.50. The BSE consumer durables index ended down 2 percent, FMCG index down 2 percent, realty index shed 1.9 percent and capital goods index lost a percent.

Cairn India lost nearly 2 percent, after management issued guidance for a slower ramp-up in production from the Rajasthan block.

But the biggest loser from the oil and gas space GAIL, down 4.5 percent, on reports suggesting that billionaire Mukesh Ambani's Reliance Logistics (Relog) Infrastructure has complained to the petroleum and natural gas minister, Veerappa Moily for ''being treated differently" by his ministry that was "applying different standards" for his private company vis-à-vis state-owned GAIL, which is India's leading gas pipeline construction and transmission company.

Shares of Hindustan Unilever, India's largest consumer goods maker, tanked 5 percent after the firm reported a 16 percent jump in third-quarter net profit, but low volume growth and a rise in royalty payments.

Top Sensex gainers: Sun Pharma (1.55%), NTPC (1.45%), Jindal Steel (0.53%), Bajaj Auto (0.37%) and M&M (0.26%)

Dollar demand from state-run banks erased most of the rupee's early gains. The rupee is at 53.64/65, pulling back from the day's high of 53.375 following the government's announcement of raising import duty on gold, a key source of dollar demand after oil in India. The pair had closed at 53.765/775 on Monday.

"Market went excessive short in the morning. So there is some covering up now," says a dealer with a foreign bank.

India has raised the import tax on gold by 2 percentage points to 6 percent to curb purchases and rein in a ballooning fiscal deficit, but industry officials expect only a moderate drop in demand.

However, the rupee has turned the corner and is seen on a strengthening trend following the recent fiscal and financial reforms undertaken by the government, dealers say.

Key equity benchmark slipped into red as traders booked profits after strong earnings from blue-chip companies including Infosys and RIL, reform measures by the government and rate cut expectation by the RBI have led to a 3 percent rise in the index in 2013 as of Monday's close.

At 14.07 hrs IST, the Sensex is down 34.69 points or 0.17 percent at 20067.13, and the Nifty down 9.70 points or 0.16 percent at 6072.60.

Retail major Pantaloon Retail gained as much as 13.8 percent after the RBI eased restrictions on the purchase of shares in the company by foreign institutional investors and by non-resident Indians as well as persons of Indian origin.

The Reserve Bank of India took the measures after the aggregate shareholding held by these categories of investors fell below the threshold limit under the Foreign Direct Investment Scheme, meaning these investors can now buy into Pantaloon shares.

Leading the gainers: ICICI up 1.3 percent, Reliance Industries up 0.99 percent. Top index gainers: Asian Paints up 3 percent, NTPC rises 2.1 percent.

About 1079 shares have advanced, 1575 shares declined, and 739 shares are unchanged.

After breaching 6100 for the first time since January 2011, the Nifty has cooled off a bit. The Sensex was up 19.77 points at 20121.59 while the Nifty was up merely 6.10 points to stand at 6088.40.

Top gainers on the Sensex were Sun Pharma, NTPC, HUL, ICICI Bank and Bajaj Auto gaining 2-1% each. Jet Airways shot 3% as per CNBC-TV18's sources Abu Dhabi-based Etihad Airways may have agreed on a valuation of USD 1.25 billion for an undisclosed stake in Jet Airways. However, the stock immediately lost investors interest and is currently up only 1.1% on the BSE.

On the losing side were Gail (down 3.8%), while Tata Motors, Hindalco, Tata Power and Hero MotoCrop are down around 1% each.

Experts say that the market is surging on steady capital inflows and strong corporate earnings. Foreign institutional investor (FII) investments in Indian equities have crossed Rs 13,000 crore in January itself. However, Gautam Trivedi of Religare Capital Markets is worried on continuous selling by the domestic investors. In an interview to CNBC-TV18, he said that the Indian equity benchmarks need to rise another 10 percent for retail interest to return. "Going forward, interest rate cuts are going to be a key trigger for the market", he said.

Siddharth Bhamre of Angel Broking too warned that the rally from 5,950 to 6,050-6,080 levels is not supported by the broader market but only three stocks; Reliance Industries , ONGC and Infosys. "Hence this rally is not sustainable because other stocks have corrected," he added

The Nifty breached the 6,100 level for the first time since January 6, 2011. Strong earnings from blue-chip companies including Infosys and RIL , reform measures by the government and rate cut expectation by the RBI have led to a 3 percent rise in the index in 2013 as of Monday's close.

Leading the gains on Tuesday: ICICI up 1.3 percent, Reliance Industries up 0.99 percent. Top index gainers: Asian Paints up 3 percent, NTPC rises 2.1 percent.

The BSE Sensex is up 0.07 percent and the Nifty gains 0.11 percent.

Cairn India shares rise as much as 2.55 percent on December quarter earnings. But they gave up most gains after a Kotak report said management guides to a slower ramp-up in production from the Rajasthan block to 200-215 kb/d by end-FY2014 versus their earlier outlook of 210-240 kb/d by end-CY2013.

Asian Paints Hindustan Unilever shares up 1 percent ahead of earnings. India's largest consumer goods maker is expected to post a 16 percent rise in third-quarter net profit to Rs 88 lakhs, according to StarMine analyst estimates.

Key indices were flat in early trade, awaiting fresh triggers to build on the recent rally. Brokers said strong third quarter earnings that have been reported so far, has been discounted and the focus is now on the RBI monetary policy review meeting next Tuesday.

The Sensex was at 20115, up 13 points and the Nifty was at 6091, up 9 points.

Pantaloon Retail led gainers, with the stock up over 9 percent to Rs 265.10. Metal, power and banking shares were steady in early trade, while IT, FMCG and capital goods shares were subdued.

Brokers said a 25 basis point-cut in interest rate by the RBI has already been discounted, and shares would rally only if the cut was more than that.

But chances of a 50 basis point-cut appear slim after RBI governor D Subbarao last week said inflation was still high and tackling it would be the central bank's priority.

Among other gainers, Asian Paints, Sun Pharma, Havells India and NTPC were up around 2 percent each.

Laggards included Opto Circuits, Max India HCL Tech and Bharti Airtel, which were down between 1-2 percent.