Equities snapped a week-long rally as investors took profits at higher levels on Monday. Market players said the six-day winning streak of over 2% was facing some exhaustion and there was a need to pause.
The Sensex crossed the psychological 25000-mark to hit 25186, while the Nifty hit 7504, but then heavy selling in midcap and smallcap stocks led the fall, market players said.
The 30-share Sensex recovered after to falling to an intra-day low of 24,434 before closing at 24,716.88, which was 23.53 points higher form the previous close. Nifty, too, recovered from its day's low of 7,269.05, and closed 8.05 points lower from Friday's close at 7,359.05.
"The market's behaviour is a knee-jerk reaction. What we saw was a correction over the last 7-10 days of sustained rally," said Arun Kejriwal of Kejriwal Research.
Most market players expect some consolidation around 7250 levels. Also, this week being May F&O expiry, there could be volatility following rollovers to June series.
"There were no surprises today at the swearing-in ceremony of the new Prime Minister Narendra Modi, so expect the rally to resume," said a market participant.
The markets recovered towards the last 30 minutes of trading, and most participants said the party was not yet over.
"The market has stabilised. Given the continued interest of foreign funds, there is a strong buying support," said U R Bhat, managing director of the UK-based Dalton Strategic Partnership LLP.
According to Rahul Shah, vice-president, equity advisory at Motilal Oswal, the fall was largely spearheaded by mid- and small-cap stocks due to the F&O expiry this week.
"The junk stocks that rallied in the run-up to the swearing-in of the new prime minister and his team started losing steam and hit key indices," he said.
The BSE Mid-cap Index fell 2.11% at 8485, while the BSE Small Cap Index was down 2.24% at 8,923.65. Of the 50 stocks on Nifty, 18 advanced while 32 declined. Prominent Nifty losers were DLF 6.03%, Bhel (5.84%), IDFC (5.34%) and Bank of Baroda (4.58%). Gainers were M&M (7.37%), SSLT (4.34%) and HCL (3.94%).
State Bank of India which recently rallied 10 % on Friday fell only 100 bps on Monday.
Shah said junk stocks were dragging down the indices while fundamentally strong scrips were still a buy.
Market players said the next trigger would be outcome of the new Cabinet minister meet with Modi today.
This apart, the new government's Budget for the year and the Reserve Bank of India's monetary policy review in the first week of June are awaited by the market.
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