Markets may extend losses, Bankex weighs

Markets may extend losses in the last leg of trade led by fall in capital goods, consumer durables and banking shares as investors turn jittery ahead of quarterly earnings and the increasing heft of rising prices.

Sensex was fairly volatile throughout the day, the benchmark moved in 459 points range, touching an high of 19,720 and a low of 19,261. The Sensex shed 426 points, at 19,264 and the Nifty declined 133 points, at 5771.

While markets were volatile, Analysts said that huge swings may provide good opportunities. Sankaran Naren CIO Equity, ICICI Prudential AMC said, "equity markets in 2011 will be volatile and for investors, volatility will provide investment opportunities."

There are expectations that markets may continue to remain under pressure as valuations were over bought. Dilip Bhat, joint managing director, Prabhudas Lilladher said, “the Indian markets are in catch 22 situation where sudden gush of FII money has pulled the market in little over valued zone. The present valuations assumes that Indian will continue to grow at an upwards of 8-8.5 per cent, at the earnings growth in FY12 of around 20 per cent."

Earnings season is kick starting this week with Infosys results on Thursday, margins are expected to take a hit due to rising commodity prices. Naren said, "We are very comfortable with the aggregate profitability of the corporate sector, however increased commodity and crude price is actually detrimental to the economy."

Elsewhere in Asia, markets ended on a mixed note. Hong Kong's Heng Seng index fell 0.7%, China's Shanghai Composite declined
1.7%, Straits Times and Seoul Composite were down 1% and 0.3% each. Japan's Nikkei 225 was up 0.1% and Taiwan Weighted gained
0.4%.

Back in India, the horizon continued to remain cloudy for the banks, BSE Banking index was off 2.3% on prospects of an expected rate hike later this month to stanch spiraling food prices. Sankaran Naren CIO Equity, ICICI Prudential AMC said, "in the last six months banks were fully valued, and therefore we have trimmed our exposure to banking." HDFC Bank lost 4.7%, Kotak Mahindra Bank declined 3.9% and ICICI Bank was off 3.4%.

BSE Capital goods was the top sectoral loser, down 2.9%, followed by Consumer Durables, down 2.4%. In the Capital goods sector, Praj Industries shed 4.7%, BHEL was down 4% and Larsen & Tourbo declined 3.6%. From Consumer Durables space Bajaj Electricals declined 4.3%, Gitanjali Gems was off 4.2%, and Rajesh Exports slipped 3.6%,

BSE IT index managed to hold on to gains, up 0.1%. IT bellwether Infosys climbed 1% ahead of third quarter results. Patni Computers climbed 1.5% on deal news, iGate announced that it will acquire majority stake in Patni Computer Systems.

Broader markets were also leading the losses, midcap and smallcap indices were down over 2% each.