Markets log biggest fall of month amid declines in banking heavyweights

Nervousness ahead of crucial data pull indices down

Indian equity benchmarks fell on Monday amid declines in banking heavyweights and nervousness ahead of a data-heavy week that will release inflation data from both the US and India.

The Sensex ended the session on Monday at 73,503, a decline of 617 points or 0.8 per cent. The Nifty fell 161 points or 0.7 per cent to end at 22,333.

This was the biggest single-day fall for both the indices since February 28. The Nifty Smallcap 100 continued to underperform, dropping 2 per cent, while the Nifty Midcap 100 fell 0.4 per cent.

HDFC Bank, which fell 1.3 per cent, was the biggest contributor to the Sensex decline. The lender's stocks declined after some analysts recently downgraded its target price, citing medium-term risks and a gradual recovery in net interest margins (NIMs).

Investors were also cautious ahead of the release of inflation data in India and the US on Tuesday.

Equity markets are riding on bets that the US Federal Reserve (Fed) is moving closely to pivot to easier monetary policy. Investors will keenly track the US inflation data as it is the major piece of economic data before the Federal Reserve's March meeting. A stronger-than-anticipated number will dent market sentiment.

Meanwhile, moderation in prices will raise wagers for rate cuts. Last week, Fed Chairman Jerome Powell testified before the Senate that the US central bank is not yet ready to cut interest rates. European Central Bank (ECB) Chairman Christine Lagarde also spoke of rate cuts beginning as early as June this year.

“Continued sell-off in global markets due to uncertainty over rate cuts impacted domestic market sentiment, which is currently overbought. The stronger-than-expected US non-farm payroll data and caution ahead of the release of US inflation data on Tuesday kept investors on the edge. The broader market continued its underperformance due to valuation concerns, while investors are rebalancing their portfolios to include haven assets like gold,” said Vinod Nair, head of research at Geojit Financial Services.

Going forward, apart from inflation data, the statements of macro policy officials and other macro data from across the globe will determine the market trajectory.

“The intermediate dip in the index after every uptick and underperformance of the broader indices are making traders' lives difficult. We feel this may continue due to mixed trends across index majors. In the present scenario, traders should avoid aggressive longs and prefer a hedged approach,” said Ajit Mishra, senior vice-president — technical research, Religare Broking.

The market breadth was weak, with 3,095 stocks declining and 876 advancing. Apart from HDFC Bank, Reliance Industries and ICICI Bank, which fell 0.9 per cent each, were the big contributors to the Sensex decline. Telecom stocks fell the most, and its sectoral index on the BSE plummeted by 2.4 per cent.