Markets end near two-year low on PSU banks woes

Markets ended at their lowest level since May 2014 amid a sell-off in state owned banks after they reported huge losses because of higher provisioning on account of rising non-performing assets.

The S&P BSE Sensex ended down 262 points at 23,759 and the Nifty50 closed 83 points lower at 7,216

In the broader market, the BSE Midcap and Smallcap indices were down 1%-1.4% each. Market breadth remained weak with 1994 losers and 654 gainers on the BSE.

"We continue to remain cautious on the markets and view the current downside in the markets driven by global factors (China instability, US corporate earnings, fears of global banks) rather than domestic factors (weak earnings, sustained asset quality worries). The recent correction in the market only underscores the extended recovery for the Indian economy in current circumstances and especially PSU banks having asset quality woes. Foreign portfolio flows are unlikely to bottom fish in such an unstable environment. However, Indian macro fundamentals continue on a gradually improving tracjectory and markets should then outperform in any turnaround," says Tirthankar Patnaik, Chief Strategist, Mizuho Bank.

The rupee was trading flat at 67.91 against the US dollar compared to its previous close of 67.90

GLOBAL MARKETS

Asian stocks fell sharply on Wednesday amid concerns over the banking sector in the euro zone region. Japanese shares extended losses to hit 16-month low on the back of an appreciating yen. The benchmark Nikkei ended down 2.4% to end below 16,000 at 15,713.39 while Singapore's Straits Times ended down 1.6%.

However, European shares rebounded on Wednesday after encouraging earnigns from select corporates and M&A activity boosted sentiment. The CAC and DAX were up nearly 2% each while FTSE was up nearly 1%.

SECTORS & STOCKS

BSE Bankex was down 2% while on the NSE the Bank Nifty eased 1.9% and PSU Bank Nifty slumped 5.4%.

As many as 147 stocks from the S&P BSE500 index fell below their May 15, 2014 level in intra-day trade today. Shares of public sector banks (PSBs), metals, infrastructure, realty and oil & gas sectors witnessed heavy selling pressure.

State-owned banks such as Oriental Bank of Commerce, Bank of India, UCO Bank, Indian Overseas Bank, Dena Bank, Allahabad Bank, Syndicate Bank and Punjab National Bank dropped more than 50% below their May 2014 price in intra-day trade.

Punjab National Bank extended losses and ended down 9% after posted a sharp 93% decline in net profit in the third quarter of the fiscal on account of fresh slippages arising from the steel sector besides higher provisioning requirement as part of RBI norms.

Central Bank of India slumped 12.4% after net loss widened to Rs 837 crore on the back of higher provisions amounting to Rs 1,499 crore. Gross NPAs were up at 8.95% compared with 6.86% quarter-on-quarter. Net NPA were higher at 5.3% versus 3.8% quarter-on-quarter.

Dena Bank reported a loss of Rs 662.85 crore for the third quarter ended December 31, due to significant jump in bad loans.Total provisions, excluding for income tax, rose fourfold to Rs 966.97 crore as against Rs 241.33 crore in the year-ago period. The stock ended over 7% down.

State Bank of India ended down 4.6% ahead of its third quarter earnings tomorrow. Among other PSU banks, Bank of Baroda eased over 5% while Canara Bank  slipped nearly 4%.

Pharma shares also lost ground with Dr Reddy's Labs closing 2% lower after it reported a marginal 1% increase in consolidated net profit at Rs 579.2 crore for the quarter ended December, 2014 on the back of lower growth in revenues. Other losers in the sector include, Lupin and Cipla dropped over 2%-3.7% each.

Mortgage lender HDFC and Tata Motors which ended down 3.2%-7% each were the top contributors to the Sensex decline.

Among other shares, InterGlobe Aviation, which operates IndiGo airline, ended down  after falling below its issue price of Rs 765 per share intra-day on the National Stock Exchange (NSE).

Just Dial rebounded after hitting its lifetime low of Rs 483 on the BSE falling below its issue price of Rs 530 for qualified institutional buyers. The stock ended up nearly 3%.

Apollo Tyres ended up 10.7% on the BSE in an otherwise weak market after the company reported a better-than-expected 51% year on year (y-o-y) increase in consolidated net profit at Rs 279 crore for the third quarter ended December 31, 2015 (Q3FY16) on back of lower raw material and finance cost.

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