The Sensex on Wednesday cracked by 456 points, while the Nifty ended below the 18300 mark as market participants resorted to profit booking amid concerns over rich valuations. This is the second straight session that the benchmark indices are closing in the red, which has resulted in investor wealth eroding almost Rs 6.82 lakh crore.
The sharp rise in equity values has led to apprehensions that the markets may have run ahead of fundamentals. The broader Nifty has gained more than 30 per cent this year, moving ahead of its Asian peers.
On Wednesday, UBS said that the Indian equity markets look unattractive on account of extremely expensive valuations.
The foreign brokerage, which is now ‘underweight’ on India added that the country, apart from Taiwan and Australia, is unattractive particularly on valuations even as Asean looks positive.
UBS said that the earnings momentum in India is seen fading and that there is less scope for an economic rebound this year. Though there has not been any big shocks in the earnings season, some of the big companies such as TCS and Hindustan Unilever Ltd have disappointed the street.
On Wednesday, the shares of the FMCG giant fell 2.63 per cent after a 4 per cent drop on Tuesday. Market circles said that while there are concerns over high valuations, the selling is on account of higher commodity prices that pose an headwind to such companies.
In Wednesday’s trading, the 30-share Sensex began in the green at 61800.07 and hit a high of 61880.36 after which profit booking set in. It later settled at 61259.96 — a drop of 456.09 points or 0.74 per cent.
Barring seven stocks in the index, the rest ended in the red with losses of up to 3 per cent. While Titan led the list of losers, it was followed by HUL, Bajaj Finserv, NTPC and Larsen & Toubro.
Similarly, on the NSE, the Nifty sank by 152.15 points, or 0.83 per cent, at 18266.60.
Mid-cap and small cap stocks also felt the heat with the Nifty Midcap index dropping 1.91 per cent while the small-cap index cracked by 2.42 per cent.
“Indices corrected quite meaningfully led by the expensive side of the market where valuations had got stretched,” said S. Ranganathan, head of research at LKP Securities.
