Indian shares drop as IT, financials rally peters out

By Bharath Rajeswaran

BENGALURU (Reuters) -Indian shares fell on Thursday as the rally in financial and IT stocks since the U.S. Federal Reserve’s rate pause fizzled out.

The NSE Nifty 50 index lost 0.25% to close at 19,395.30, while the S&P BSE Sensex settled 0.22% lower at 64,832.20.

The Nifty has gained roughly 2% since Nov. 1, when the Fed held rates steady, with its stance on monetary policy less hawkish than expected.

“The markets look a little over extended after the recent rally,” said Amit Kumar Gupta, founder at Fintrekk Capital.

Since the Fed pause, the IT and financials had also gained about 2%. They fell 0.65% and 0.10%, respectively, on the day.

However, Gupta says a significant correction in the Nifty or large-cap stocks is unlikely as investors adjust their portfolios.

“After the sharp rally in small- and mid-caps over the last few months, investors are likely to change their portfolio strategy to move from small- and mid-caps to large-caps to ward off volatility.”

The small- and mid-cap indexes have jumped 37% and 29%, respectively, in 2023, easily outpacing the Nifty’s 7% gain.

Small-caps fell 0.24% on the day, while the mid-caps added 0.22%.

The gainers included real estate stocks, which jumped 1.23% to a record high.

The auto index gained 0.83%, led by a 4.35% rise in Mahindra & Mahindra ahead of its results on Friday.

It was among the top Nifty gainers along with Apollo Hospitals, which closed 3.65% higher after posting a higher quarterly profit.

Tech Mahindra, Hindustan Unilever and Tata Consumer Products were among the top Nifty losers.

(Reporting by Bharath Rajeswaran in Bengaluru; Editing by Sohini Goswami and Savio D’Souza)