Sharp correction drags Sensex by 368 points, Nifty below 10,700

Subdued global cues, correction in mid- and small-caps, along with fall in financials weighed on equity markets here. The Nifty closed below 10,700-mark, while the Sensex shed over 365 points.

Broader markets witnessed a deeper cut, with Nifty Midcap index ending over 2 percent lower. 43 stocks on this index ended lower, with maximum cuts visible among Dewan Housing, Indian Bank, Canara Bank, Reliance Infra and Muthoot Finance. They fell between 4 and 12 percent.

Additionally, technical factors and expectations of a populist Budget piled on to the negative sentiment.

“A possible announcement of a nationwide direct farmer support scheme is quite likely in the Budget on February 1. A Telangana-style scheme could cost Rs 1.2 trillion, further complicating fiscal math, as it could be a recurring liability. The RBI’s possible large dividend might help just one time,” said a CLSA report.

Digital media agency, Reuters in a report quoting sources said that the ruling Bharatiya Janata Party-led alliance will woo rural and urban middle-class voters with farm relief measures and tax cuts, said officials privy to plans for the final budget.

At the close of market hours, the Sensex is down 368.84 points or 1.02% at 35656.70, and the Nifty down 119.00 points or 1.10% at 10661.50. The market breadth was negative as 617 shares advanced, against a decline of 1940 shares, while 127 shares were unchanged.

TCS, Coal India, Zee Entertainment and Bharti Infratel gained the most, while Yes Bank, Bajaj Finance, Adani Ports and Indiabulls Housing lost the most.

Stocks in the News

Godrej Properties slipped 0.5 percent despite company reporting net profit for the quarter ended December 2018 (Q3FY19).

Zee Entertainment Enterprises shares rallied 16 percent as brokerages remained positive on the stock, and after the Essel Group inked deal with lenders.

Meanwhile, Canara Bank reported a whopping 152.50 percent on year growth in third quarter profit at Rs 317.52 crore despite tepid growth in NII and lower other income & operating income. Lower provisions drove the profitability higher. The stock, however, fell 5 percent.

Larsen & Toubro shares gained 1 percent as brokerage houses remained bullish on the stock and expect the stock to return 19-50 percent after December quarter earnings.

Edelweiss Financial Services shares fell 2 percent after global brokerage house Credit Suisse downgraded the stock to neutral from outperform, citing higher provisioning cover.

Global Markets

Stocks in Europe were in the red as investors awaited for cues from US-China trade talks. Stoxx 600 index was lower with all major bourses and most sectors pushing lower.

Major Asian stock markets closed lower, amid a turbulent session, as investors here too waited for any outcome from US-China trade talks. The Shanghai composite shed about 0.18 percent to close at approximately 2,596.98 while the Shenzhen component ended its trading day slightly lower at around 7,589.58. The Shenzhen composite slipped 0.377 percent to close at 1,314.99.