Exit poll euphoria wanes, Sensex sheds 383 points

After touching a record high, key benchmark indices reversed gains on Tuesday in a volatile market as the euphoria around the exit polls ebbed.

On Tuesday, the S&P BSE Sensex tanked 382.87 points, or 0.97% at 38969.80, while NSE Nifty 50 fell 119.20 points, or 1.01%, at 11709.10.

On Sunday, the exit polls predicted a second term for the National Democratic Alliance (NDA) government, which resulted in euphoria on Monday after the markets opened. May 20 witnessed a record high in a decade as Sensex jumped 1,422 points to 39352.67, while Nifty rose 421 points to 11828.25, the highest single-day gain for the indices since 2009.

On Tuesday, too, Sensex touched an intra-day high of 39571.73, before selling pressure gripped the markets, sending the index to hit intra-day low of 38884.85.

Gaurav Ratnaparkhi, senior technical analyst, Sharekhan by BNP Paribas, said the bulls attempted to build upon the Monday's gains at the beginning of the session.

"They managed to take out the all-time high of 11856 and registered a new high of 11883. In the higher territory, however, the Nifty couldn't hold on to its gains. The bears rushed in soon after the opening and imposed themselves on the market as the day progressed. On the downside, 11591 and 11426 are the key levels for the Nifty for the short term," he said.

Of the 30-stock Sensex, three stocks – Reliance Industries, Bajaj Finance and Hindustan Unilever – reported marginal gains. Tata Motors, Maruti Suzuki, IndusInd Bank, Bharti Airtel, Mahindra & Mahindra and Power Grid Corporation witnessed profit booking. The stocks lost between 2.13% and 7.05% on Tuesday.

Of the 11 sectoral gauges, all witnessed selling pressure, led by Nifty Auto (-2.52%), Media (-2.32%), Metal (-1.55%) and Bank (-1.47%).

Romesh Tiwari, head of research, CapitalAim, said the market may remain volatile till election results are declared and if the BJP-led government again comes into power at the Centre, the uptrend in Nifty could be possible. The hopes of rate cut by the Reserve Bank of India in June would also be a positive factor for the index.

"For the rest of the week, FMCG and banking sector could be strong, while auto sector may remain weak. This week, Nifty would have resistance at 12000 while it would have support at 11420 levels," Tiwari said.

Mustafa Nadeem, CEO, Epic Research, said this is a classic piercing line pattern formed on the key indices such as Nifty, Nifty Bank and Sensex followed by other sectoral indices.

"The bulls got trapped as the exaggeration soon disappeared with profit booking. A close below previous day's midpoint also made sure that any upside will be seriously thought on," Nadeem said.

CAUTIOUS APPROACH

• Of the 30-stock Sensex, three stocks – Reliance Industries, Bajaj Finance and Hindustan Unilever – reported marginal gains
   
• Tata Motors, Maruti Suzuki, IndusInd Bank, Bharti Airtel, Mahindra & Mahindra and Power Grid Corporation witnessed profit booking