PSU banks were the top losers after the RBI said they would need higher-than-budgeted capital infusion.
Benchmark share indices failed to extend the previous day's pull back and the Nifty breached 8,000 to end near eight-month closing low amid a sharp sell off in PSU bank shares after the RBI on Thursday said that they would need higher -than-budgeted capital infusion.
The 30-share Sensex closed after shedding 470 points or 1.75% to 26,371 levels. The 50-share Nifty breached its crucial technical level of 8000 and closed at 7,965 points, down by 159 points or 1.96%.
A planned $1.2 billion capital infusion by the government into state-run lenders during the fiscal year to March 2016 will not be enough, Reuters said in a report quoting Reserve Bank of India (RBI) Deputy Governor S S Mundra.
The government had budgeted a smaller-than-expected infusion of Rs 7,940 crore ($1.24 billion) to shore up the capital of the state-run banks at the federal budget unveiled in February, the report added.
According to K.Subramanyam, Co-Head, Equity Advisory at Altamount Capital, "The 8,000 level looked vulnerable and the bounce back yesterday was sold into which was inevitable as sentiments are still weak with monsoons playing truant. The expectation is that a level of 7,200 could be touched by September if corporate results for the June quarter remains disappointing and monsoons continue to remain scarce. Ideally investors should use this opportunity to gradually accumulate quality stocks instead of rushing into the markets."
The broader markets also succumbed to selling pressure with BSE Midcap and Smallcap indices down by 1.78% and 1.55% respectively. The market breadth ended negative with 1,855 declines against 784 advances on the BSE.
On the currency front, at 3:30 PM, the Indian rupee was down by 8 paise and was trading at Rs 63.92 against the greenback tracking weakness in the local equities.
Key macro-economic events
On the macro-economic front, India’s current account deficit (CAD) declined sharply to $1.3 billion (0.2% of gross domestic product) in the quarter ended March from $8.3 billion (1.6% of GDP) in the quarter ended December.
Moreover, on Friday, the government will announce the industrial production data for the month of April 2015. The industrial output was at 2.1% for the month of March from a revised 4.9% for the month of February.
Also, the announcement of the consumer price index (CPI) data for the month of May 2015 is scheduled for tomorrow.
Meanwhile, the World Bank forecasts a slower economic growth for the world economies. However, according to its report, it predicts India to emerge as the fastest growing economy in 2015, with India’s growth pegged at 7.5%, outstripping China, which the Bank expects to grow at 7.1% in 2015.
Sectors and stocks
Out of 30 stocks on the Sensex, 29 stocks slipped into the negative zone.
On the sectoral front, all the sectoral indices ended in red. Leading the downfall was BSE Bankex and Auto dropped by 2.37% , followed by Power, Consumer Durables and Information Technology indices.
CNX PSU Bank was the top loser down 2.7%.
Banking sector bled heavily on account of profit-booking after the central bank on Monday issued fresh guidelines, which would allow banks to take control of debt-laden companies by converting loans into equity.
Bank Nifty shed 430 points or 2.3% Among the PSU banks Punjab National Bank, State Bank of India, IDBI, Union Bank of India declined 2-5%.
Tata Motors slumped over 3.5% on reports that the automobile company is suffering from the effects of a slowdown in the crucial Chinese market.
Index heavyweight Reliance Industries closed down by 3.1% ahead of the annual general meeting, which will be held on 12 June. Mukesh Ambani, chairman and managing director of Reliance Industries, likely to announce plans for telecom subsidiary Reliance Jio Infocomm in its AGM.
Shares of Tata Steel declined by 2.1% after Unions in UK notified plans to take industrial action in dispute over the Tata Steel UK's proposals to revise the British Steel Pensions Scheme's contribution and benefits framework.
On the gaining side, Vedanta was the sole gainer, 1.5% up on the BSE after the reports suggest that the company is all set to announce its merger with Cairn India on Sunday.
Shares of Hindustan Unilever declined marginally by 0.1% on the Sensex after the company decided to withdraw its range of Knorr instant noodles from the market awaiting product approval from the Food Safety and Standards Authority of India (FSSAI).
Smart movers
AstraZeneca Pharma India was locked at 20% upper circuit on BSE after the company announced the launch of Forxiga (dapaglifozin), a breakthrough treatment for Type 2 diabetes mellitus.
Shares of Glenmark Pharmaceuticals went up by 1% on BSE after Glenmark Pharmaceuticals Inc., USA has been granted final approval by the USFDA for Calcipotriene Cream, 0.005%
Shares of Surana Solar slumped 20% on BSE after media reports clarified that the bulk deal in the stock was not done by ace investor Rakesh Jhunjhunwala but by his namesake.
