Sensex edges lower, Reliance hits 1-month high

Indian markets closed marginally lower Wednesday but the losses could have been bigger but for the outperformance of Reliance Industries. The Sensex closed 14.5 points (0.09%) lower at 16,451.47 while the Nifty index declined 11.50 points to 4,955.

Market bellwether Reliance Industries said it will consider a buyback of its shares on 20 January, when it reports its third quarter numbers. As a result, RIL closed with over 5% gains, ending the session at 1-month high. These levels were last seen on 16 December.

The move was seen as a big positive for the stock though analysts wondered if India's biggest company did not know what to do with the massive cash it has on its books.

"This comes at a time when the stock has seen severe underperformance over the last 2-2.5 years... The balance sheet is in the best of shape as compared to the last many years... A better option is to straightaway pay a big dividend to the shareholder because there is no better option that paying dividend to shareholders," Rajat Rajgarhia, Head - Research of Motilal Oswal Securities said.

RIL is India's largest company and the buy back is likely to be the biggest in India's history, Jagannadham Thunuguntla, Strategist & Head of Research, SMC Global Securities said.

Anil Ambani promoted ADAG stocks - Reliance Infra (3.3%) and Reliance Power (2.76%) - also closed with gains.

The Bombay Stock Exchange's (BSE) oil and gas index jumped over 3% on the back of the outperformance by Reliance. ONGC (2.4%), BHEL (2%) and IOC (1%) were the other stocks that finished higher on the energy index.

Almost all other groups of stocks closed lower on the BSE. IT stocks (down 2%) underperformed the broader markets after TCS (down 2.62%), which is India's biggest software services exporter, failed to exceed Street expectations in the third quarter. That affected sentiments in all IT stocks. Wipro (down 2.7%), Infosys (down 1.87%) and HCL Tech (down 1.7%) ended lower.
Metal and capital goods stocks saw profit booking after big gains yesterday. Both these indices closed with over 2 per cent losses today. Tata Steel (down 4%) was the biggest loser on the Nifty. Public sector undertakings in these two sectors - SAIL (down 3.8%) and BHEL (down 2.7%) also saw selling pressure.

Other stocks moving on news flow included:

Coal India (down 3.4%) declined after the Coal Minister said there was no plan to raise coal prices despite a wage hike.

Airline stocks- Jet Airways (5%) and SpiceJet (2.5%) - closed higher for a second straight day after Civil Aviation Minister Ajit Singh announced yesterday that he will bring a Cabinet Note to allow foreign airlines to invest upto 49% in Indian carriers. Foreign direct investment (FDI) in aviation is an attempt to bail out bleeding airlines, most of which are facing severe financial crunch.

HDFC Bank (2.9%) closed higher ahead of reporting Q3 numbers tomorrow.

The market breadth was positive with 76% stocks ending higher on the broader BSE 500 index.