The benchmark Sensex swung nearly 500 points in the intra-day trade as the turmoil in banking stocks hit investor sentiment. Fresh tensions between the US and China weighed on overseas flows. Market players said traders held light positions ahead of the release of key data, such as the second-half borrowing calendar, balance of payments, and auto sales numbers.
The Sensex ended 155 points, or 0.4 per cent, lower at 38,667, while the Nifty50 index declined 38 points, or 0.33 per cent, to close at 11,474. Foreign portfolio investors sold shares worth Rs 470 crore, even as domestic investors provided buying support to the tune of Rs 505 crore.
The performance of banking and financial stocks was a big drag on the markets, even as gains in technology, consumer goods and oil stocks helped offset most of the losses.
Market players said investors pulled money out from financial stocks amid concerns over the troubles at Indiabulls Housing Finance which could spark another debt crisis. Shares of YES Bank declined 15 per cent, the most among Sensex companies, followed by IndusInd Bank, which declined 7 per cent. SBI, ICICI Bank, and HDFC declined over 3 per cent each.
“Strong selling in banks, NBFCs, and metals dragged the indices down during Monday’s trade. Selling in Indiabulls Housing Finance further weighed on market sentiment as it may have good exposure with banks,” said Rohit Singre, senior technical analyst at LKP Securities. Shares of Indiabulls Housing Finance, which was part of the Nifty index until last week, dropped over 34 per cent.
Investor sentiment towards financial stocks was already fragile after irregularities in the Punjab and Maharashtra Cooperative Bank came to light. Other major losers in the financial space included Reliance Capital, RBL Bank, Edelweiss and L&T Finance — each dropping over 10 per cent.
Market players said investors have been eyeing the Reserve Bank of India’s (RBI’s) policy announcement scheduled for Friday and the start of the September quarter earnings season.