Mumbai: The equity markets slumped sharply on Tuesday slipping below their crucial support levels amidst heavy selling in bank stocks on reports that they would be required to set aside higher provisions for loans referred for insolvency process.
A weakness in global stocks along with concerns regarding the preparedness of India Inc for the GST that is likely to be implemented from July 1 also triggered heavy selling across the sectors.
The Nifty slumped below its crucial support level of 9,500 in the intra-day trade before closing the session at 9,511.40, down 63.55 points or 0.66 per cent. The Sensex dropped below its crucial 31K level mark to end the day at 30,958.25, down 179.96 points or 0.58 per cent.
“The short-term impact of GST could be neutral to negative for the broader economy. Production processes will likely take some time to align with the new framework as firms adjust to the input tax credit system and get a handle on the working capital requirements too. Micro and small enterprises could see costs increase due to higher compliance and a shift towards the organised sector. We would be cautious on economic growth for next one to two quarters,” said analysts at Kotak Securities.
“Tuesday’s correction was no surprise as market hinted towards it on Friday. The only required development was the breakdown below the important support zone of 9,580–9,560 levels. A breach of this support was the trigger point for Tuesday’s correction and in the process, the Nifty sneaked below the 9,500 mark in the intra-day trade,” added Sameet Chavan, technical and derivative analyst at Angel Broking.
Bank stocks were the biggest losers in the large cap stocks that dragged down the BSE Bankex by 1.45 per cent. While the shares of PNB tanked 4.69 per cent, the shares of Bank of Baroda and SBI dropped 3.64 per cent and 3.27 per cent respectively.
The broader markets also remained extremely weak with 1,913 stocks on the BSE ending the day lower as compared to just 691 stocks that advanced.
