Nifty falls for sixth session in a row; closes below 9,500

The benchmark Nifty index recorded its sixth straight session of loss amid weakness in consumer shares and energy producers, ahead of the derivatives expiry on Thursday. The 50-share index fell 20 points, or 0.21 per cent, to 9,491.25, a new one-month low.

The BSE Sensex fell 124 points, or 0.4 per cent, to close at 30,834.32. The index has declined five times in the past six sessions. The BSE consumer durables index fell 1.22 per cent, the most among the 13 sectoral indices. Asian Paints fell 2.2 per cent amid expectations of higher costs following roll-out of the goods and services tax (GST) on July 1. Index heavyweight Reliance Industries fell 2.6 per cent, highest among Sensex companies, as investors booked profits following sharp recent gains. Automakers Mahindra & Mahindra and Hero MotoCorp also fell as investors turned cautious ahead of GST implementation.

The roll cost, or the price traders pay to replace current month futures with July securities, was 39 basis points in Mumbai a day before expiry, compared with the threemonth mean of 37 basis points, data compiled by Bloomberg show.

The higher cost implies investors are prepared to pay more to buy new contracts on the NSE Nifty 50, underpinning an index which has reached record highs several times this year.

“The derivatives expiry is keeping markets choppy,” said Soumen Chatterjee, head of research at Guiness Securities. “We are advising clients to buy on dips. Large-cap stocks look better as mid-caps are likely to remain under pressure due to deleveraging.”

The recent weakness in the market has seen the Sensex come off from its all-time high of 31,311.6 on June 19. The Nifty has come off nearly two per cent from its record level of 9,675 on June 5.

“Markets settled marginally lower in a range-bound session, continuing its corrective phase. Meanwhile, traders kept themselves busy in rollover and unwinding of their derivatives positions. We expect volatility to remain high, due to scheduled F&O expiry and the GST implementation. Traders are already struggling, and we feel the upcoming events will further add to their worries,” said Jayant Manglik, president, retail distribution, Religare Securities.

On Wednesday, foreign portfolio investors (FPIs) sold shares worth ~470 crore, while their domestic peers were net buyers to the tune of ~ 169 crore. So far this month, FPIs have pulled out nearly $500 million from the domestic stocks in June. On a year to date basis, however, their investment tally stands at over $8 billion.

Following a sharp 16 per cent rally this year, the Sensex now trades at one-year forward valuations 19 times, above its long-term trading average of around 16 times. On a relative basis, the valuation of the Indian markets is expensive compared to other emerging market peers.