Markets extend gains; Nifty regains 9,650 in afternoon trade

In the broader market, the S&P BSE Midcap underperformed to rise just 0.1%

The benchmark indices extended gains in the afternoon trade on Monday as lenders such as State Bank of India gained after the Reserve Bank of India asked banks to start banktruptcy process against 12 large loan defaulters, raising hopes that reduction of bad debt will start to quicken.

At 2:16 pm, the S&P BSE Sensex was trading at 31,328, up 272 points, while the broader Nifty50 was ruling at 9,658, up 70 points.

In the broader market, the S&P BSE Midcap underperformed to rise just 0.2%, while the S&P BSE Smalcap index was little changed. 

The market breadth, indicating the overall health of the market, turned negative from positive. On BSE, 1,226 shares fell and 1,201 shares rose. A total of 138 shares were unchanged.

The Reserve Bank of India urged lenders to initiate bankruptcy proceedings against a dozen companies, including Essar Steel, Bhushan Steel and Monnet Ispat and Energy, sources with direct knowledge of the matter said.

The RBI said it had identified the 12 defaulters last week, but did not publicise their names.

The Nifty PSU Bank Index gained as much as 0.8%, with top lenders State Bank of India up as much as 0.7% and Canara Bank rising as much as 1.8%.

Loan defaulters that are facing bankruptcy proceedings however fell.

Lanco Infratech was down as much as 8.5% to Rs 2.15, a record low, after it said it was one of the companies that had been identified by the RBI to start bankruptcy proceedings.

Shares of Monnet Ispat and Energy fell as much as 19.9%.

The Nifty Pharma Index was down as much as 1% as ongoing quality concerns raised by the US Food and Drug Administration pressured pharma stocks.

Cipla, the biggest drag on the pharma index, was down 2%.

Overseas, Asian stocks were trading higher as markets geared up ahead of Brexit negotiations between the UK and the European Union, and as French President Emmanuel Macron's party won a parliamentary majority at the weekend.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.7%.

Japan's Nikkei climbed 0.6%.

Australian shares added 0.3% and South Korea's KOSPI rose 0.4%.

(With inputs from Reuters)