Sensex ends 416 pts lower, Nifty below 12,300 as global oil prices shoot up

Brent crude prices surged past the $65 a barrel level as unrest hit key production regions

The benchmark indices slipped on Monday following the underwhelming December quarter (Q3) results of some large banks, earnings disappointment by heavyweights Reliance Industries and Tata Consultancy Services (TCS), and a spike in crude oil prices over Libya shutting down two production bases.

The Nifty index logged its biggest single-day fall in nearly four months, declining 128 points, or 1 per cent, to 12,225. The Sensex ended at 41,529, down 416 points, or 1 per cent — the most since January 6. Both indices had hit fresh highs in early trade but failed to sustain the gains. The India Vix index, a gauge for market volatility, spiked 9.1 per cent.

Concerns over asset quality and loan growth that got highlighted in Q3 results hurt investor sentiment towards banking stocks, with the Nifty Bank index falling 1.6 per cent. Major banks, such as HDFC Bank, Kotak Mahindra Bank, Axis Bank, RBL Bank, and State Bank of India, saw their stock prices decline by up to 5 per cent on Monday.

“Asset quality pressure from sectors like agriculture and commercial vehicles and slower growth reported by strong banks like HDFC Bank is making investors cautious about the performance of other banks,” said Lalitabh Srivastava, deputy vice president at Sharekhan.

Mona Khetan, analyst at Reliance Securities, said: “With the rise in corporate stress during Q3 (on expected lines), even bellwethers like HDFC Bank and Kotak Mahindra Bank have been impacted.”

In recent times, on the back of expectations that asset quality woes have peaked out, the stocks of major banks have found strong investor support. The Nifty Bank index had gained about 9 per cent in the three months ended January 17 versus a 7 per cent rise in the Nifty50 during the same period. The asset quality pressure from the non-core segments seen in Q3 is now getting factored in, says another analyst.

Nonetheless, analysts do not see these as a major concern, at least, for the large banks. “For banks like HDFC Bank and Kotak Mahindra Bank, we expect the trend to reverse in a few quarters,” said Srivastava.

Reliance Industries’ shares, too, fell 3.1 per cent in the Sensex. The Street was disappointed by weak numbers for the petrochemical business during Q3, said analysts.

The markets came under selling pressure also on the account of rising oil prices because of Libya’s eastern strongman, Khalifa Haftar, keeping virtually all of the nation’s oil fields shut. In Iraq, which is Opec’s second-biggest producer, a strike at a key oil field hit output.

With agency inputs