Mumbai, Oct. 24: Diwali arrived early on Dalal Street today, but the fireworks did not last long as profit booking saw the BSE Sensex ending with a loss of 42 points after rallying past the 21000-mark in intra-day trade for the first time in almost three years.
The benchmark index closed at 20725.43 as investors turned cautious ahead of the RBI policy review next week. There are fears that the central bank may raise the policy rate to ward off inflation.
However, there is an optimism that the rally will pick up soon because of the continuation of a strong liquidity flow from foreign institutional investors (FIIs), apart from a few positive elements at the macro level.
Foreign investors have purchased equities amounting to $1.8 billion so far in October.
According to Rakesh Tarway, assistant vice-president (research) at Motilal Oswal Securities, a further rally can be expected on the back of an improvement on the macro front in terms of lower crude prices, falling current account deficit and an appreciating rupee.
He added that a consistent flow of liquidity in large caps was now shifting to mid and small caps. Over the last five days, the BSE mid-cap index has outperformed the Sensex by almost 100 per cent.
The Sensex had closed at an all-time high of 21004.96 on November 5, 2010, while its intra-day peak was 21206.7 scaled on January 10, 2008.
Market circles said IT stocks, which had been rallying over the past few days, witnessed the maximum profit-booking. TCS, Wipro and Infosys were the biggest drag on the index.
Coal India, Jindal Steel and Bhel were the other major losers as 19 stocks on the Sensex declined. Investors also sold metal and realty stocks.
The Sensex opened at 20766.05 and breached the 21000-mark within 45 minutes of trade to touch 21039.42 on brisk buying in auto, banking, consumer durables and oil & gas sectors.
Buying was seen in PSU bank stocks, which gained after the finance ministry said yesterday that the Centre would infuse Rs 14,000 crore into 20 state-run lenders.
However, steady profit booking post noon saw the index erasing its early gains and closing at 20725.43, a drop of 42.45 points, or 0.20 per cent.
The Sensex had last topped the 21000-mark on November 8, 2010.