Sensex at the lowest level since December 7; banking stocks slide

The Nifty50 index declined 95 points, or 0.93%, to 10,154

The benchmark BSE Sensex declined for the sixth session on Wednesday as banking stocks continued to bleed in the aftermath of an alleged Rs 127-billion fraud at Punjab National Bank.
 
Shares of leading banks, including State Bank of India (SBI) and ICICI Bank, tanked for the second straight day as central agencies widened their probe into the country’s biggest banking scam. Global markets also remained weak after Gary Cohn, a free-trade proponent, resigned as economic advisor to US President Donald Trump, reigniting prospects of a global trade war.
 
The Sensex fell 284 points, or 0.85 per cent, to 33,033, the lowest level since December 7. The Nifty50 index declined 95 points, or 0.93 per cent, to 10,154. Both the indices have declined close to 4 per cent in the last six sessions and are down 10 per cent from their record highs touched in late January.
 
“Weak global cues due to concerns over an escalating trade war and the widening probe in banks led the fall in the domestic market. The market has come off from its highs as investors sentiment has been hurt by domestic and global development. Consolidation in bond yields and easing global market volatility is likely to provide some leeway,” said Vinod Nair, head of research, Geojit Financial Services.
 
Both Asian and European markets traded in the red, while safer assets like developed world bonds and the Japanese Yen gained.
 
“Banks are fighting a perception battle as the negative news does not seem to stop and markets are understandably worried. Hopefully, we are in the last round of asset quality repair and one way to look at it is that whatever is happening is happening for the good,” Jagannadham Thunuguntla, head of research for wealth at Centrum Broking, told Bloomberg.
 

Shares of SBI and ICICI Bank fell nearly 3 per cent each, extending their two-day losses to over 5 per cent. Reliance Industries (RIL) and ONGC dropped over 2 per cent each after global oil prices fell over 1 per cent. RIL was the biggest drag on the Sensex, contributing 64 points to the fall. ICICI Bank and SBI dragged the index lower by 55 points and 37 points, respectively.
 
“We remain cautious in near term. Volatility may remain high on weak global sentiment, selling pressure from overseas investors, rising bond yields in the US and continued underperformance by banking stocks,” said Jayant Manglik, president, Religare Broking. The market breadth was extremely negative, with 500 stocks advancing against 2,240 stocks declining on the BSE. All but one of the 19 sectoral indices of the BSE ended with losses.