Sensex, Nifty posts biggest monthly drop on global cues, weaker bank stocks

Sensex's 11 week winning streak ends; Axis Bank, SBI and ICICI Bank shed over than 3.4 per cent each

Domestic markets posted their biggest single-day fall in a month on Friday amid a slide in global equities and selloff in banking shares. Most global stocks dropped as investors pruned their bullish bets as rising covid-19 cases sparked concerns over corporate earnings and economic revival. The dollar strengthened and yields rose due on inflation expectations.

The benchmark Sensex finished at 48,878.5, down 746 points, or 1.5 per cent—ending its 11-week gaining streak. The Nifty closed at 14,372, down 218 points, or 1.5 per cent—most since December 21.

The Bank Nifty index plummeted 3.2 per cent after Bandhan Bank’s jump in provisions and deterioration in asset quality spooked investors. Shares of Reliance Industries fell 2.3 per cent ahead of December quarter result announcement and dragged the Sensex lower by 143 points. Shares of Axis Bank, State Bank of India and ICICI Bank fell over than 3.4 per cent each. Shares of metal companies also plunged as with SAIL dropping 10 per cent and Jindal Steel and Hindustan Copper falling over 5 per cent each.

The fall in the market was cushioned by gains in Bajaj Auto, Hindustan Unilever and TCS. Shares of Bajaj Auto jumped over 10 per cent after it posted better-than-expected jump in profits for the December quarter.

A day earlier, the Sensex had vaulted past the historic 50,000-mark. However, failed to sustain on to the gains as investors judged recent gains as excessive. Since November, the Indian markets have rallied more than 25 per cent amid record inflows by foreign investors. And from the March lows, the benchmark indices are up more than 90 per cent.

Not just India, but a slew of emerging markets posted record highs this week on hopes of another round of stimulus in the US under the Joe Biden presidency. Already, dovish outlook adopted by major central banks has helped fuel an unprecedented appetite for risk assets.

Earlier this week, Treasury secretary-designate Janet Yellen urged the Congress to “act big” on spending to shore up economic growth, while defending President Biden’s $1.9 trillion coronavirus spending plan. The former Fed chair’s comments gave more fodder to the bulls to take stocks higher.

Market players said ahead domestic investors could keep position light ahead of the Union Budget on February 1. Besides, budget cues investors will keenly eye result announcements.  Nine of the 12 Nifty 50 companies that have declared their results for December quarter surpassed analyst estimates.