Sensex reclaims 73K, Nifty 22K but selling pressure emerges; defence, Adani shares tumble

Stock indices Sensex and Nifty climbed over 1 per cent each at open on Wednesday but soon witnessed heavy selling pressure, as they slipped in to the red.  Stocks initially gained as the Prime Minister Narendra Modi is seen assuming the office for third time under NDA. But analysts believe there could be unresolvable disagreements within the NDA coalition that are not priced in by the stock market.  Defence stocks tanked; Adani group shares were mixed. 

Sensex climbed 1.31 per cent and breached 73,000 mark at open, before erasing entire gains. The 30-pack index was trading 35 points lower at 72,043.90, as analysts felt stock derating looms large. Nifty also breached the 20,000 mark before erasing its gains.

Among defence stocks, Bharat Dynamics plunged 10 per cent to 1,293.35. Cochin Shipyard also fell 10 per cent, NBCC 9.48 per cent, HUDCO 7.58 per cent and MIDHANI 6.76 per cent. Engineers India, IRCON International, Indian Bank, REC, RVNL, Hindustan Aeronautics, BHEL and Oil India fell over 5 per cent each.

Adani group flagship Adani Enterprises fell 3 per cent. Adani Energy Solutions plunged 9 per cent while Adani Power declined 8 per cent. Adani Ports an Adani Total Gas fell 2-3 per cent.

UBS said it was not an election outcome the market valuations were set up for, adding India market valuations have been expensive for pretty ordinary corporate earnings growth outlook. It said one of the arguments behind India's rich valuations was the political stability afforded by a strong government. Some of those assumptions could now come under question, it said.

Moggan Stanly said unresolvable disagreements within the NDA coalition are not priced in by the stock market. Morgan Stanley said contrary to what was priced in the equity market, the BJP has fallen short of a majority in Parliament (272 seats) with around 240 seats. The National Democratic Alliance, however, has passed the halfway mark. Therefore, the BJP-led NDA is likely to form the next government, it said.