Markets resume downward spiral; banks, financials weigh

Equity benchmarks slipped into the negative territory on Thursday, led by banking, financial and auto stocks, as weak growth signals clouded the outlook for the ensuing results season.

After sinking 375 points during the day, the 30-share BSE Sensex ended 297.55 points, or 0.78 per cent, lower at 37,880.40.

Similarly, the broader NSE Nifty fell 78.75 points, or 0.70 per cent, to close at 11,234.55.

Investors turned risk averse amid expectations of tepid earnings by corporates, brokers said.

Moreover, Moody's Investors Service on Thursday slashed its 2019-20 GDP growth forecast for India to 5.8 per cent from 6.2 per cent earlier, saying the economy was experiencing a pronounced slowdown which is partly related to long-lasting factors.

Kicking off the earnings season, IndusInd Bank logged a 52.2 per cent jump in Q2 consolidated net profit, but also reported a spike in bad loans, which sent its shares tumbling 6.15 per cent -- the most among the Sensex constituents.

Other index laggards included Yes Bank, Tata Motors, Vedanta, ICICI Bank, SBI, HDFC Bank and Tata Steel, falling up to 5.21 per cent.

Bharti Airtel was the biggest gainer, spurting 5.05 per cent, after Reliance Jio's decision to start charging for voice calls lifted the revenue outlook for the battered sector.

RIL, HUL, HCL Tech, PowerGrid, Sun Pharma, Asian Paints and Bajaj Auto were the other winners, gaining up to 2.76 per cent.

"Market failed to hold its last day gains at the start of the Q2 results. It is expected to trade in a narrow range of 11,300 to 11,100 for Nifty 50 in the very short-term.

"Banks underperformed due to concern over slippage and on-going crisis in the sector. The preview analysis of Q2 result is muted due to no real increase in demand and prices, this may impact the performance during the month," said Vinod Nair, Head of Research at Geojit Financial Services.

According to a Motilal Oswal report, the second quarter earnings season will be tepid and uneventful. Underlying demand slowdown in the domestic economy and weak global commodities prices are expected to take a toll on earnings.

Echoing the outlook, Sunil Tirumalai, Head of Research and Strategist, Emkay Global Financial Services, expects growth trends to weaken further from Q1 levels, with the decline led by auto, telecom, power, IT services and pharma sectors.

Sectorally, BSE bankex, realty, finance, metal and auto indices fell up to 2.61 per cent.

Telecom, energy, teck and oil and gas indices rose up to 3.76 per cent.

Broader BSE midcap and smallcap indices followed the benchmarks, shedding up to 0.87 per cent.

Globally, investors were largely cautious ahead of the latest round of US-China trade talks.

In Asia, Shanghai Composite Index, Hang Seng and Nikkei settled on a positive note, while Kospi closed in the red.

Equities in Europe were trading higher in early sessions.

Meanwhile, the Indian rupee appreciated marginally to 71.04 against the US dollar intra-day.

Brent crude futures, the global oil benchmark, declined 0.74 per cent to USD 57.89 per barrel.