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Volatile Sensex hits 40,000, plunges 1,300 pts intra-day as investors book profits

The BSE building in Mumbai. The Sensex erased early gains to end 299 points lower on Thursday. (Express photo by Pradip Das)

The BSE Sensex skyrocketed by over 1,000 points to touch the 40,000-mark for the first time ever following the BJP-led NDA s thumping electoral victory. However, with the investors rushing in to book the profits, the Sensex plunged 1,314 points, or 3.27 per cent, from the record intra-day high of 40,125.

The Sensex finally closed 298.82 points, or 0.76 per cent, lower at 38,811.39, while the Nifty settled 80.85 points, or 0.69 per cent, lower at 11,657.05. In terms of points, the Sensex fall was the biggest intra-day slide since January 2008.

The rupee also gave up gains and closed 36 paise lower at 70.02 against the US dollar after investors shifted focus to macro-economic developments that will set the tone for the forex market in the coming months.

Analysts said the markets have already discounted the election outcome and the investor focus would now shift to reforms, government policies, economic growth, corporate performance, monsoon and developments surrounding the US-China trade conflict. The big mandate stimulated the market to a new high providing a solid pre-election rally of 11 per cent. Since the final outcome is in-line with expectation, we can have a mild consolidation in the short-term. This is because neither the earnings nor the economy has started to pick up and unlikely to revamp immediately as it takes one or 2 quarters before stabilising. These factors along with premium valuation and muted global trend will start to control the momentum of the market as optimism gets digested, said Vinod Nair, head of research, Geojit Financial Services.

The re-election of NDA alliance has put to an end to the uncertainty and raised hopes of momentum gaining in the Indian economy and markets, which logically attained new heights today. The results have raised hopes of the issues being faced by the economy being tackled in a firm and prudent way. This is the first time in world history that a government that has introduced GST in a country has been voted back to power, said Dhiraj Relli, MD and CEO, HDFC Securities.

Rahul Agarwal, director, Wealth Discovery EZ/Wealth, said, the 2019 mandate is hugely positive signal for the markets, although today s price action in the markets was contrary to the election results. After touching an historic 40,000, the BSE Sensex gave up all the gains and in-fact closed in the red down by 300 points, Nifty also gave up almost a gain of 350 points and closed with losses. This behaviour can be attributed to the fact that traders took this opportunity to book profits. HDFC twins, Infosys, TCS, Reliance were largely responsible in pulling the indices down, while the index received some support from IndusInd Bank, ICICI Bank and L&T.

Meanwhile, the domestic currency could not hold on to the gains and settled at 70.02 per dollar. The rupee started at two week s high of 69.50 against American dollar, but erased gains to trade at 70.04 with the loss of 37 paise or 0.52 per cent. Now, the focus will shift to crude oil, trade war and the RBI monetary policy, said V K Sharma, head PCG & Capital Markets Strategy, HDFC Securities.