Indian benchmarks fell close to 1% each on Thursday, with a sell-off in financials dragging the indices.
The Bankex (down 936 points) and Bank Nifty (down 806 points) declined close to 1.8% each. Three of the top five Sensex losers were banks, with Kotak Mahindra Bank and ICICI Bank shedding close to 3.5%, and Axis Bank shedding close to 3%.
State Bank of India, however, was the biggest gainer on both indices, rising more than 3.5%. Interestingly, state-owned banks and private lenders showed opposing trends, with the Nifty PSU Bank index jumping 2% and private bank index falling 2.6%.
“PSU banks have been playing catch-up, and are finding buyers thanks to attractive valuations. Private banks, on the other hand, are bearing the brunt of higher valuations. It is a rebalancing act by the markets,” said D P Singh, Joint CEO of SBI MF.
The 30-share Sensex declined 723.57 points or 1% to 71,428.43, while the broader Nifty shed 212.55 points or 0.97% to 21,717.95.
SBI and Bank of Baroda rallied more than 3.6%, while Canara Bank and Bank of India also rallied more than 3% each. Indian Overseas Bank and UCO Bank, however, slumped more than 6%.
On the other hand, all private banks except City Union Bank closed in the red.
Market analysts say that with the threat of inflation still lingering and the Reserve Bank of India maintaining its ‘withdrawal of accommodation’ stance, pressure will remain on net interest margins of private players, especially thanks to the tightened policy regime.
“The incomplete transmission of the cumulative 250 bps and the inflation ruling above the target level adds to uncertainty about the timing of rate cuts. The ripple effect was seen in the government 10-year yield, which inched higher. A large pocket of the market slid into red like FMCG, banks, and auto,” said Vinod Nair, Head of Research, Geojit Financial Services.
Foreign institutional investors were net sellers for the third session in a row, pulling out a net Rs 1,691.02 crore, while domestic investors continued to be net buyers with a net purchase of Rs 327.73 crore, showed provisional data by the exchanges.
Investor wealth suffered a Rs 1-trillion erosion to Rs 388.2 trillion, after touching a fresh high of Rs 389.2 trillion a day earlier.
Among broader indices, the BSE MidCap closed marginally up 0.08% at its closing high of 39,895.42, having also scaled its lifetime high of 40,282.49 in intra-day trade. The BSE SmallCap, however, fell 0.44%, having closed at a high of 46,484.65 on Wednesday.