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Sensex, Nifty fall for third day as HDFC twins plunge

HDFC Bank was among the top losers as the markets witnessed a sharp sell off.

, ET Bureau|
Jul 22, 2019, 04.15 PM IST
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In the 30-pack Sensex, 16 stocks ended in the green and 14 in the red with HDFC as the worst performer and YES Bank the best.
NEW DELHI: Equity benchmark indices Sensex and Nifty extended their decline for the third session in a row on Monday, dragged by banking, realty, FMCG and financial stocks as government's reluctance to tweak foreign portfolio investors (FPIs) income tax surcharge continued to weigh on the markets.

HDFC Bank was among the top losers in the Sensex pack as the markets witnessed a sharp sell off. The stocks of the lender cracked up to 4 per cent, after the bank reported a rise in nonperforming assets (NPAs). HDFC Bank on Saturday had posted a 21 per cent year-on-year (YoY) rise in standalone net profit at Rs 5,568.16 crore for the quarter ended June 2019. During the quarter, gross NPAs rose to Rs 11,768.95 crore which is 1.40 per cent of the total advances, compared with Rs 9,538.62 crore which was 1.33 per cent in the same quarter 2018-19 fiscal.

Analysts said that the markets were witnessing broadbased selling as disappointing earnings and reports of slowing economic growth were denting market sentiments. They were further of the view that the selloff by foreign funds was due to the government's reluctance to remove the applicability of the new surcharge on the super rich on foreign portfolio investors (FPIs).

Sahaj Agarwal, Head of Derivatives, Kotak Securities said, "Nifty has broken its previous bottom of 11,460 and is expected to remain under selling pressure in the near term. On the downside strong support is seen at 11,000-11,100 levels; the same can be tested unless any meaningful reversal is seen in the broader markets. Midcap indices trade around pre-election levels; high volatility is expected in this space. 11,000 remains an inflection point for the index for the next few months; Make or break of the same is expected to define the further course of the markets."

Also, slow progress of monsoon weighed on investors' risk appetite as IMD said that deficient rainfall was expected over half of India this season.

On the global front, Asian shares closed lower as investors reduced expectations of an aggressive interest rate cut by the Federal Reserve, while heightened Middle East tensions following an Iranian seizure of a British tanker lifted crude oil prices. MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.4 per cent. Japan's Nikkei closed down 0.2 per cent on the more tempered Fed easing views and caution ahead of the domestic earnings season which starts this week.

Brent crude futures were up 2.08 per cent, at $63.77 a barrel while West Texas Intermediate (WTI) crude futures were up 1.80 per cent, at $56.63. The rupee slipped 18 paise down at 68.98 against the US dollar on account of some buying in American currency by banks and importers amid sustained selling by foreign institutional investors.

BSE Sensex closed 305.88 points, or 0.80 per cent, lower at 38,031.13. While NSE Nifty ended at 11,337.15, down 82.10 points or 0.72 per cent.

Market at a glance

In the 30-pack Sensex, 16 stocks ended in the green and 14 in the red with HDFC as the worst performer and YES Bank the best. Kotak Mahindra Bank, HDFC Bank, HUL and Bajaj Finance too joined HDFC on the losers list, slipping up to 5 per cent.

Vedanta, Maruti Suzuki, Asian Paints and RIL were among other Sensex stocks that advanced.

The BSE Midcap index declined 0.60 per cent. The BSE Smallcap index ended 1.15 per cent lower underperforming benchmark Sensex.

BSE Finance index recorded losses of 2.28 per cent followed by FMCG, Realty and Bankex index. While BSE Metal and Energy index were among the best performers.

In terms of index contribution, TCS, RIL, Maruti Suzuki and Asian Paints were the top support while HDFC twins, Kotak Bank and ITC were the top drag on Sensex.

Expert Take

A crack in the HDFC twins, Bajaj Finance will seriously impact NAVs of mutual funds which might face a further cascading effect. The vicious circle is deepening and the necessity of liquidity will eventually lead to large liquidations even in frontline stocks. Investors should mentally be ready to see further cuts in their portfolio values until at least till Diwali. They are advised to wait and not do bottom fishing currently. Nifty50 can reach 10,000 levels before Christmas this year. They may raise cash levels in their portfolio by selling some of the front line stocks in the financial space so that later they can reinvest in beaten down stocks
- Umesh Mehta, Head of Research, Samco Securities

Market entered into a bearish phase as investors turned sellers due to concerns over extension of economic slowdown and weak corporate earnings hurting the sentiment. This correction has expanded to large caps which until now were attracting FII inflows, but concerns over tax and muted Q1 results will continue to impact
- Vinod Nair, Head of Research, Geojit Financial Services

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