The wider 50-scrip Nifty of the National Stock Exchange (NSE) also closed in the negative zone. It was down 31 points or 0.37 percent at 8,339.35 points.
The Sensex of the S&P Bombay Stock Exchange (BSE), which opened at 27,633.66 points, closed the day’s trade at 27,531.41 points, down 112.47 points or 0.41 percent from the previous day’s close at 27,643.88 points.
The BSE Sensex touched a high of 27,675.94 points and a low of 27,473.54 points in the intra-day trade.
Market analysts covering the day’s trade said that notices on minimum alternate tax (MAT) sent to foreign investors has aroused fears of retrospective taxation.
The MAT issue has eroded the bargain hunting interest by foreign institutional investors (FIIs) that has been underpinning markets last week.
The MAT on capital gains is expected to impact the margins of foreign funds. This has hit their investment appetite for the Indian equities market.
India has also under performed in comparison to other EMs (emerging markets) like China, as the benchmark index of the China based market closed over 2 percent up compared to -0.40 percent in India.
“When earnings in India is still haven’t bottomed-out and valuation is above the long-term range, FII flows is being impacted,” said Vinod Nair, head of fundamental research with Geojit BNP Paribas Financial Services.
“But DIIs (domestic institutional investor) are supporting the market, while FII inflows is negative for the month at – Rs.50 billion. Immediate trend will depend on Reserve Bank of India’s (RBI) policy action next week.”
The RBI is scheduled to conduct its bi-monthly monetary policy review on June 2.
Gaurav Jain, director with Hem Securities said that: “Investors prefer to stay sidelines ahead of the derivative contracts expiry due on Thursday, thereby putting pressure on Indian bourses.”
Analysts added that decent corporate earnings by direct-to-home (DTH) service provider, Dish TV and capital goods major BHEL failed to cheer sentiment, as broader indices outperformed the Sensex.
Canara Bank’s fall to its lowest in an year, after results showed a rise in NPA (non-performing assets) impacted the banking index.
On Monday, the Sensex closed over 300 points or 1.00 percent down due to some poor corporate results and indications of a sooner-than-anticipated hike in the US interest rates.
The main concern for the markets on Monday was the uneven corporate results for the fourth quarter for the last fiscal, as also some remarks made by the US Fed that the rate hike could come earlier than what the markets had discounted for.
Sector-wise, oil and gas, healthcare, automobile, fast moving consumer goods (FMCG) and capital goods stocks came under selling pressure. However, power index marginally rose.
The S&P BSE oil and gas index dived by 97.75 points, healthcare index receded by 68.33 points, automobile index declined by 53.79 points, FMCG index decreased by 41.91 points, and capital goods index fell by 22.05 points.
However, S&P BSE power index was marginally up by 0.42 points.
The major Sensex gainers on Tuesday were: BHEL, up 2.88 percent at Rs.241; Coal India, up 1.41 percent at Rs.374.95; Hero MotoCorp, up 1.24 percent at Rs.2,619; Maruti Suzuki, up 0.96 percent at Rs.3,727; and Bajaj Auto, up 0.96 percent at Rs.2,324.
The losers were: Vedanta, down 2.33 percent at Rs.195.35; ONGC, down 2.05 percent at Rs.322.55; Tata Motors, down 1.60 percent at Rs.497.10; NTPC, down 1.34 percent at Rs.132.60; and DrReddy’s Lab, down 1.07 percent at Rs.3,546.55.
Among the Asian markets, Japan’s Nikkei was higher by 0.12 percent. China’s Shanghai Composite Index moved up by 2.02 percent. Hong Kong’s Hang Seng rose by 0.92 percent.
In Europe, London’s FTSE 100 edged-down by 0.22 percent. France’s CAC 40 was higher by 0.31 percent, while Germany’s DAX Index lost 0.50 percent at the closing in the Indian markets.