Markets end flat as banks’ stocks underperform

Broader markets underperformed the benchmark indices on Tuesday ending the trading session with losses as compared to the benchmarks that ended the day flat. The Nifty was up by 3.5 points (0.03%) to close at 11,934.5, while the Sensex rose by 31.7 points (0.08%) to close at 40,625.51. Conversely, Nifty Midcap 100 and Nifty Smallcap were down by 0.48% and 0.17%. The markets were helped because of buying in Reliance Industries and information technology stocks, which offset the drag in the financial stocks that were down after the Supreme Court postponed the hearing on the interest waiver case.

The benchmarks have been range bound for the last two trading sessions. The midcap and smallcap stocks have been under duress since the start of October, with the Nifty Midcap 100 and Nifty Smallcap 100 indices down by 0.76% and 0.27% so far this month. This is the first time since the rout in March that the midcap and smallcap stocks have underperformed the broader markets. G Chokkalingam, chief investment officer, Equinomics Research and Advisory, said, “The overall market cap has crossed Rs 160 trillion, which means that valuations have peaked. IPOs, offer for sales and placements too have sucked the liquidity out of the system. Additionally, investors are cautious ahead of the quarterly results which is why the markets will trade at the current levels and can possibly see a correction of 4% to 5% this month.”

Additionally, after the banking stocks especially Nifty Bank declined by 0.93% after the Supreme Court announced that it would take up the much awaited hearing on the interest waiver case the next day instead of Tuesday. The biggest losers on Nifty Bank were Bandhan Bank, RBL Bank, ICICI Bank, Punjab National Bank, and Axis Bank which were down by 2.84%, 2.83%, 2.13%, 2.11%, and 1.7%. So far, the Nifty Bank since the start of the year is down by 26.8%.

The outperformance that the banking stocks had over the benchmarks since 2016 to 2019 has been completely wiped out because of their current market underperformance. Banks are also set to announce their September quarter results. According to HDFC Securities Institutional Research Desk, the banking sector is going to continue to see polarisation. In its report, the brokerage said, “We expect the space to witness increased polarisation. Consequently, larger banks with sufficient capital, strong granular liability franchises, and a good asset quality track record are expected to emerge stronger.”

Asian markets were trading flat on Tuesday with the stock markets in South Korea and Taiwan down by 0.02% to 0.03%. Shanghai Composite, China’s benchmark was up by 0.03%. European markets in France, the UK, and Germany were down between 0.37% to 0.67%.

Foreign portfolio investors have so far this month have bought equities worth $821 million. On Tuesday, they bought stocks worth $112.4 million. The futures and options segment saw a turnover worth Rs 15.48 lakh crore and the cash market saw a turnover worth Rs 50,360.21 crore. This is against the six month average of Rs 16.78 lakh crore and Rs 56,614 crore. The biggest gainers on Nifty were HCL Technologies, Infosys, Kotak Mahindra Bank, Reliance Industries, and Ultratech Cement Company that were up between 4.03% to 1.73%. The biggest losers were Cipla, Titan Company, Adani Ports and SEZ, Divi’s Laboratories, and ICICI Bank down between 3.58% to 2.13%.