Global cues drag Sensex 166 pts; Nifty manages to hold 9600; PSU Bank down 2%

Equity benchmarks as well as broader markets lost more than half a percent Monday on correction in global peers, and on caution ahead of macro economic data due later today. Globally investors turned cautious after hung parliament result in the UK general elections and ahead of central banks meetings during the week.

The 30-share BSE Sensex slipped 166.36 points to 31,095.70 after a consolidation seen in previous week. The 50-share NSE Nifty managed to hold its psychological 9,600 level, down 51.85 points at 9,616.40.

At present, divergence between the benchmark index and broader market is the main cause of concern, Jayant Manglik, President of Retail Distribution at Religare Securities said, adding eventually, both should align for any directional move.

According to him, however, such divergence may continue for a month or two. So traders should restrict their positions and wait for clarity, he advises.

Markets will react to the macroeconomic data i.e. IIP and CPI inflation in early trade on Tuesday and that will set the tone for rest of the day, he feels.

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Asian shares also closed in negative territory. European stocks were lower on caution after a hung parliament in the UK and ahead of Federal Reserve meeting later this week. France’s CAC and Germany’s DAX were down 1 percent each at the time of writing this article.

Back home, the market breadth was also negative as about 1,694 shares declined against 1,021 advancing shares on the BSE.

Banks stocks were under pressure after Maharashtra government on Sunday decided to waive off farms loans of small and marginal farmers. Nifty Bank lost 1 percent and PSU Bank was down 2 percent. ICICI Bank, SBI, Bank of Baroda, PNB and Axis Bank were down 1-3 percent.

“Frequent occurrence of such populist actions leads to risks of impaired credit discipline and weak risk-reward for banks and reduced credit availability for borrowers. Public banks face greater impact than private banks,” Kotak said.

Meanwhile, Finance Minister Arun Jaitley discussed finances of public sector banks, their bad loans status, with heads of the lenders. He said the RBI is in an advanced state of preparing a list of bad loans where resolution is required under the insolvency and bankruptcy rule. Also, the government is actively working on consolidation of state-owned banks, he added.
Among others, L&T, Reliance Industries, Tata Motors, Wipro, Bharti Airtel and Maruti Suzuki were down 1-2 percent whereas Infosys rebounded 1.6 percent after last week’s correction on pricing concerns. Sun Pharma was another biggest gainer, up 1.6 percent.