Indian stock markets this week will take cues from global trends, crude prices and the developments on the domestic front amid concerns that the ripples of alleged scam at Punjab National Bank may hit some other PSU banks, according to experts. Also, with the earnings season over, other macro-economic indicators like widening trade deficit will remain in investors’ focus going ahead, they opined. “The market has corrected by 5% from the recent all time high and we can assume that a large portion of this consolidation is finding a floor in the short-term. But investors are cautious given widening of trade deficit, rise in bond yields and global volatility,” Vinod Nair, head of research at Geojit Financial Services, said.
He further said that PSU banks will continue to under-perform in the near term “on concerns of possibility of alleged scam which may extend to some other banks”. India’s second largest PSU bank, PNB on February 14 said it had detected a Rs 11,400 crore scam where billionaire jeweller Nirav Modi allegedly acquired fraudulent letters of undertaking (LoUs) from a branch in Mumbai to secure overseas credit from other Indian lenders. While PNB did not name the other lenders, Union Bank of India, Allahabad Bank and Axis Bank are said to have offered credit based on LoUs issued by PNB.
PNB shares fell for the third straight session on last Friday and hit their 52-week low both on the BSE and the NSE. Almost, all public sector lenders saw prices of their stocks tumble after the alleged PNB fraud came to light. The shares of PNB, SBI, Union Bank of India, Allahabad Bank and Axis Bank had settled in red on Friday. During the last three trading sessions, PNB lost Rs 8,731 crore in market capitalisation.
The country’s largest lender, SBI, said it has an exposure of USD 212 million (about Rs 1,360 crore) in respect to LoU issued by PNB to Nirav Modi, but does not have any direct exposure to the jeweller. “Repercussion of the scam in a large public sector bank reverberated through markets and led to some nervous investors selling off their positions,” said V K Sharma, Head – Private Client Group (PCG), HDFC Securities.
Besides domestic developments, the movement of funds and crude oil prices are expected to dictate the market sentiment this week. During the past week, the Sensex had tumbled 286.71 points, or 0.84 per cent, while the Nifty fell 93.20 points, or 0.88 per cent.