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Sensex ends 362 points lower, Nifty falls 1%: Key factors that led to market pain

Intra day, Sensex lost 738 points to 37,929 against previous close of 38,667 and Nifty fell 227 points to 11,247 against previous close of 11447.

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Sensex ends 362 points lower, Nifty falls 1%: Key factors that led the market lower
Banking stocks fell the most with BSE bankex closing 510 points lower at 32,378 followed by BSE IT index which lost 263 points or 1.68% to 15,406.

Sensex and Nifty closed lower for the third consecutive session today led by losses in banking, information technology and capital goods stocks.  While Sensex ended 362 points or 0.94% lower at 38,305, Nifty lost 114 points or 1% to 11,359. Intra day, Sensex lost 738 points to 37,929 against previous close of 38,667 and Nifty fell 227 points to 11,247 against previous close of 11447. Banking stocks fell the most with BSE bankex closing 510 points lower at 32,378 followed by BSE IT index which lost 263 points or 1.68% to 15,406.

BSE capital goods index lost 193 points or 1.03% to 18,501. Bank Nifty too fell 1.30% or 377 points lower to 28,725 level. Of 30 Sensex stocks, 23 ended in the red. YES Bank (22.80%), IndusInd Bank (6.30%) and SBI (5.50%) were the top Sensex losers. YES Bank share price plummeted over 23% in trade today on a report that the lender's promoters have sold another 2.16% stake in the bank.

According to a report in The Economic Times, YES Capital (India), Morgan Credits Private and Rana Kapoor jointly sold 552 lakh shares, or 2.16 per cent, stake in the open market during September 26 to September 27. However, HDFC Bank (1.72%), Mahindra and Mahindra (1.71%) and Maruti Suzuki (1%) were the top Sensex gainers. Market breadth was negative with 687 stocks closing higher compared to 1796 ending lower on BSE.

Here's  a look at factors which pushed the market lower today.

Banking sector woes

Banking stocks led the losses today on a report by Jefferies which said bad loans could rise in the banking system. There is a potential "meaningful divergence" between the ratings and the debt repayment ability. YES Bank, Bank of Baroda, SBI, IndusInd Bank, and RBL Bank are among the banks, Jefferies said, that are most prone to "high risk" emanating from Anil Dhirubhai Ambani Group (ADAG), Cox & Kings, CG Power, DHFL and Essar Shipping.

The worries in the banking system were compounded by rumours about the banking system after RBI put regulatory restrictions on the Punjab and Maharashtra Co-operative Bank (PMC) for major financial irregularities, failure of internal control and systems, and wrongdoing and under-reporting of its (lending) exposure.

Later in the day, RBI came up with an assurance regarding the stability of the Indian banking system. 

The banking regulator said in a tweet, "There are rumours in some locations about certain banks including cooperative banks, resulting in anxiety among the depositors. RBI would like to assure the general public that Indian banking system is safe and stable and there is no need to panic on the basis of such rumours."

Weak macro data

The eight core industries in August contracted to over three-and-half year low of 0.5 per cent, due to decline in output of coal, crude oil, natural gas, cement, and electricity, according to a government data released on Monday. The eight core sector industries - coal, crude oil, natural gas, refinery products, fertiliser, steel, cement and electricity - had expanded by 4.7 per cent in August last year. The previous low was recorded at (-) 1.3 in November 2015.

Coal production declined by 8.6 per cent on an annual basis in August 2019, whereas crude oil production fell by 5.4 per cent during the same month. Natural gas production fell by 3.9 per cent during August 2019 in comparison to August 2018.

Cement production also slipped by 4.9 per cent in August, 2019 on a yearly basis, whereas electricity generation tumbled 2.9 per cent during this period.

Sluggish auto sales

Auto sales continued their downward journey in September. Two-wheeler maker Bajaj Auto clocked sales fall of 20 percent, year-on-year in September - logging a bigger slump than it had seen in the previous month (11 percent, YoY). 

Similarly, Maruti Suzuki reported a 24.4 percent fall in year-on-year sales to 1.22 lakh units in September, but rose sequentially from 1.06 lakh units in August. Ashok Leyland's sales fell 55 percent to 8,780 units in September. M&M recorded a 21% fall in September sales to 43,343 units in September, according to the exchange filing.

S&P lowers growth outlook

S&P Global Ratings lowered India's Gross Domestic Product (GDP) forecast to 6.3 per cent for the current financial year from 7.1 per cent projected earlier, amid decline in private consumption. The agency, however, expects the Indian economy to recover in 2020-21 to 7 per cent.

"India's slump is deeper and more broadbased than we expected. In the March-June quarter, the economy expanded by just 5 per cent, well below potential, which we estimate to be north of 7 per cent. Most alarming has been the precipitous decline in private consumption growth that had been the engine of the economy in recent years - down to about 3 per cent in the March-June quarter," the global rating agency said in a recent report on the Asia-Pacific region.

Edited by Aseem Thapliyal

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