Markets continue to trade lower, Sensex down 171 pts

Markets continued to reel under pressure in the afternoon session following weak cues from Europe as nervousness prevailed over disagreement on US debt ceiling.

The Nifty opened gap down and touched a low of 5,475 in the morning session tracking weak Asian peers. Losses in heavyweight Reliance Industries, Infosys and HDFC Bank continued to weigh on the markets. The Nifty was trading near day’s low at 5,495, down 51 points and the BSE benchmark Sensex was at 18,259, down 171 points.

There was risk aversion towards equities on concerns that US may default on debt if there is no consensus on the US debt before the August 2nd deadline.Japan's Nikkei Stock Average declined 1.5%, South Korea’s Kospi Composite lost 0.8%, Hong Kong’s Hang Seng Index ended on a flat note, at 22,571 and China's Shanghai Composite index slipped 0.5%.

European markets also dipped over gloomy earnings report and US debt woes. FTSE 100, CAC 40 and DAX were down between 0.3-1%.

Among the front line shares, Reliance Industries slipped 3%, HDFC Bank declined 2.6% and Infosys, down 1.6%. The three index heavyweights dragged the Sensex down by 120 points.

Metal shares lost sheen following a dip in global metal prices. Welcorp plunged 7%, JSW Steel lost 4.7% and Bhushan Steel fell 3.6%.

The broader market indices were also trading on a weak note. The BSE mid-cap index and the small-cap index were down 0.7% each.

The overall breadth was extremely negative 1870 stocks declined, while 922 stocks advanced.