Mumbai: The Sensex and Nifty snapped a five-day winning streak Tuesday, even as an increasing number of players are turning positive on India.
The Sensex shed 264.57 points or 1.25 percent to close at 20974.79, and the Nifty fell 64.20 points or 1.02 percent to end at 6253.15.
While the main indices were under pressure, buyers turned their attention to mid and small cap shares today, as these appear to offer a better risk-reward trade off, compared to large caps which have already run up a fair bit.
Jubilant Foodworks , Torrent Power , IRB Infra, Central Bank and Andhra Bank were among the big gainers in the midcap space, rising between 10-16 percent.
IT, healthcare and pharma stocks were among the big losers of the day. The three sectors were the main drivers of the recent rally, and investors are partly cashing out of these stocks as current valuations seem to be factoring in most positives.
Broking firm Goldman Sachs upgraded its year end Nifty target to 6900 , citing politics, macro and micro as the key triggers. Goldman is among the few brokerages to have called an earnings recovery, amid the gloomy macro-economic environment.
"The current Q2FY14 results season has come in fairly well relative to the weak macro backdrop, particularly the financials which have exceeded estimates. Looking forward, we raise our market EPS growth estimates from 8 percent to 11 percent (still below consensus) based on improving investment demand and moderating liquidity constraints for banks.
Brokerage house Nomura raised its year-end Sensex target to 22,000 from 20,000, and said that food inflation could be close to peaking out. The brokerage is betting on private banks as a play on inflation surprise and as a hedge against a potential temporary growth uptick.
"However, our core view remains that a meaningful growth revival has to be underpinned by the investment cycle, signs of which are not visible yet," the Nomura note said. Realty, power and metal shares were among the better performers, and brokers said investors are betting on these sectors to lead the market higher, given signs that the economy may be stabilizing.
"I think for long-term investors this is probably the right time to get into equities if they are underweight on equities in India," Hiren Ved of Alchemy Capital said in an interview to CNBC-TV18. "I think that at the margin, we are beginning to see the improvement in the macro data, obviously the worst for the rupee is also behind us, which was one of the big catalysts for a correction in August and September."
"I think that there was a lot of fear that Q2 numbers would be very bad but that has not been the case - by far the Q2 earning season has been pretty good," he said.
Bharti shares ended around 2 percent lower at Rs 359, unmoved by news of the company acquiring the Congo arm of the Warid Group for an undisclosed sum.
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