Benchmark share indices ended lower on Wednesday weighed down by selling pressure in bank shares on concerns of rising non performing assets in wake of the economic slowdown. Selling in metal and capital goods shares also dampened market sentiment.
The 30-share Sensex ended down 140 points at 17,301 and the 50-share Nifty ended down 51 points at 5,223.
(Updated at 14:28 hrs)
Benchmark share indices continue to trade with negative bias, tracking weakness in Asia and Europe, with bank, capital goods and metal shares leading the decline.
At 2:23pm the 30-share Sensex was down 132 points at 17,309 and the 50-share Nifty was down 48 points at 5,226.
Japan's Nikkei average fell to a near five-week closing low on Wednesday as soft U.S. manufacturing data and construction spending added to concerns about a global economic slowdown. Bearish bets on China-related stocks also helped pull the market lower as some investors were factoring in an abrupt slowdown in the Chinese economy. Concerns over China's sluggish growth have hit commodities, with iron ore falling to its lowest level since October 2009. The Nikkei ended down 1.1% while the Hang Seng dropped 1.5% and the Shanghai Composite was marginally down by 0.3%.
European shares which opened slightly higher in early trades, on hopes of action from the European Central Bank to resolve the debt crisis in the region, witnessed profit taking at higher levels. The CAC-40, DAX and FTSE-100 were down 0.3-0.7% each.
Among the sectoral indices on the BSE, Metal index was the top loser down 2.5% followed by Capital Goods, Bankex, Power, Oil and Gas. FMCG was the sole index trading with marginal gains.
Metal shares witnessed selling pressure on rising concerns of demand slowdown in wake of the sluggish economy both local and global.
Says Ambreesh Baliga, chief operating officer, Way2Wealth, “With a slowdown in China and the fall in metal prices, mainly aluminum and steel, the metal sector has been under pressure for several weeks.”
Jindal Steel, Tata Steel, SAIL, Sterlite, Hindalco were down 1-3.8% each.
“Fears of global economic growth cooling off and a crash landing of commodity prices in China have kept the metal stocks under pressure. With respect to India, the mining scam is another reason. However, for long term investors this is a good time to invest in select names like MOIL, Hindalco, Tata Steel and SAIL,” says AK Prabhakar, Senior Vice President (Equity Research), Anand Rathi.
Capital goods shares were down on concerns over delay in execution of major power projects.
BHEL slipped 4.4% after JP Morgan has downgraded Bharat Heavy Electricals to “underweight” from “neutral” and lowered its target price to Rs 185 from Rs 200, citing prospect of capacity under utilization and pricing pressure on new orders. Larsen & Toubro slipped 2.5%.
Bank shares witnessed profit taking at higher levels after recent gains on concerns of rising non-performing assets in the wake of sluggish economy and government's reduced fiscal flexibility.
Fitch Ratings says fiscal 2013 impaired assets across the banking sector may exceed its initial forecast as the economy slows. The rating agency adds that absolute cumulative gross NPLs reported at India's five largest banks - accounting for over a third of the system assets - increased by around 62 percent in the first quarter of FY13
ICICI Bank was down 3.4% while State Bank of India was trading lower by 2%. Among other banks, Bank of India and Bank of Baroda were down over 2.5% each.
Axis Bank slumped nearly 5% after Morgan Stanley today downgraded the bank to "underweight" from "equal weight", as it expects the impaired loan formation of Axis Bank to rise to 4 percent of total loans in FY14.
Among the index heavyweights Reliance Industries was down 1.4% while Infosys slipped 0.5%.
However, FMCG shares such as Hindustan Unilever and ITC were up 0.6-1% each on hopes that the revival of monsoon rains across the country would help improve farm income aiding growth in rural spends.
In the broder markets, both the Mid-cap and Small-cap indices on the BSE were down 0.4% each.
The market breadth continued to remain weak with 1,490 losers and 1,173 gainers on the BSE.