Sensex, Nifty slump in early trade; metal stocks crack, Adani Enterprises drops 4%

Pain in the banking sector from the US and Europe engulfed the bullish momentum at Dalal Street. Benchmark indices kicked off the new week with big cuts and weakness extended as the session progressed. The gloomy sentiments over the Credit Suisse crisis are weighing on the traders' sentiments.

In the week ahead, investors across the globe will be looking at the rate hike by the US Federal Reserve and the commentary amid the troubled health of lenders. UBS has announced buying Credit Suisse for $.3.2 billion, whereas Warren Buffet is reported to pump some dollars into the US banking sector.

At 9.20 am, the 30-share pack BSE Sensex was trading 459.72 points or 0.79 per cent lower at 57,530.18, whereas NSE's Nifty50 plunged 138.40 points or 0.81 per cent, to 16,961.65. Broader markets tanked in tandem with the headline peers as BSE midcap and smallcap indices shed a per cent each. Fear gauge India VIX spiked over 10 per cent to 16.28-level.

Nifty50 index has approached key support of 16,800 amid oversold conditions. Further, it has witnessed a follow-through to Thursday’s Doji-like candle at the key support of 16800, indicating abating downward momentum, said ICICIDirect Research.

"In the upcoming eventful week, volatility would remain high wherein we expect an extended correction to get arrested around the key support zone of 16,800. Thus, traders should refrain from creating aggressive short positions," it said.

On a sectoral front, all the sectors were trading in the red. Nifty Metal index led the losers, falling more than 2 per cent, whereas Nifty Media, PSU Bank and Auto indices more than a per cent, each. IT, Private Bank and Financial Services indices also weighed on the market sentiments.

Five Nifty50 stocks were trading higher on Monday. Dr Reddy's Labs and Bharat Petroleum rose almost a per cent each, whereas Divis Labs, Hindustan Unilever and Titan were also seen in green.

Among the losers, Adani Enterprises dropped as much as 4 per cent after Adani Group reportedly suspended work on a Rs 34,900 crore petrochemical project in Gujarat's Mundra. Apollo Hospitals were down 3 per cent, whereas JSW Steel and Hindalco shed 2 per cent, each.

The fears of financial contagion arising from the banking crisis in the US and Europe appear to be largely contained by the quick response of the governments and central banks. The big learning from the global financial crisis of 2008 is that failure of large financial institutions will lead to systemic issues leading to financial contagion and ultimately to a recession, said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

"Learning from this crisis, this time there has been a concerted global action - the latest being the buyout of Credit Suisse by UBS - to contain the crisis. The volatility index in the US at around 25 doesn’t indicate any panic like in 2008. However, investors may remain cautious and wait for stability," he said.

In the broader markets, Hi-Tech Pipes tumbled about 7 per cent as the scrip traded ex-split today. Network18 Media and Investments dropped 6 per cent Music Broadcast, Craftsman Automation and National Aluminum Company dropped up 4 per cent each.

On the other hand, Caplin Point Labs rose more than 7 per cent, whereas Cochin Shipyard gained about 6 per cent after the company bagged orders worth Rs 550 crore from Navshuttle, Netherlands. SJVN also rose more than 4 per cent after its wholly owned subsidiary SJVN Green Energy received a Letter of Award from Maharashtra State Electricity Distribution Company for 200 MW Solar Power Project.
 

Also read: Adani Green, Adani Ports shares in focus as Adani group looks to refinance $1.15 billion bonds 

Also read: Adani Enterprises, Adani Ports, other Adani group shares in focus today on suspension of Rs 34,900 crore Gujarat project