mumbai 09 05, 2012, 18:10 IST
The BSE Sensex and Nifty fell on Wednesday, with losses in Axis Bank and ICICI Bank weighing on sentiment as concerns loomed over growing impaired loans at a time when corporates are battling a sluggish economy.
The fall mirrored Asian peers as investors grew edgy ahead of a European Central Bank meeting on Thursday to discuss the euro-zone debt crisis.
Impaired assets during fiscal 2013 across the banking sector may exceed initial forecasts as the economy slows, at a time when domestic macro indicators suggest government should act soon on executive reforms, Fitch Ratings said in note.
"We are still on a weak footing as a lot depends on how government takes steps on reforms," said Sudip Bandyopadhyay, MD & CEO, Destimoney Securities Pvt Ltd.
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"If reforms such as diesel price hike, FDI happen, markets would move in positive direction. If not, then Nifty can slide till 5,000 level," he said adding ECB meeting and U.S. payrolls data will be very crucial this week.
The oil ministry is in favour of an increase in the prices of diesel, LPG and kerosene and oil retailers may also raise petrol prices after September 7, when the current session of parliament ends.
The benchmark BSE index fell 0.73 percent to end at 17,313.34, its lowest close since August 3.
The 50-share NSE index ended down 0.92 percent at 5,225.70 points.
Investor sentiment was also hit as Morgan Stanley downgraded private lender Axis Bank to "underweight" from "equal weight", saying it expects the bank's impaired loans to rise.
Axis Bank ended 4.9 percent lower, registering its biggest percentage fall since February 27. ICICI Bank ended 3.6 percent lower while State Bank of India lost 2.4 percent. The National Stock Exchange's benchmark for banking stocks also declined 1.9 percent.
Kotak Securities said it sees a "subdued outlook" for Reliance Industries' refining and chemical cycles over the next 12-18 months, given unfavourable global supply-demand balance.
Metal shares fell across the board as global commodity prices declined on growing concerns about the strength of the global economy.
Tata Steel fell 3.8 percent, Jindal Steel & Power lost 4.9 percent while Hindalco Industries ended 2.7 percent lower.
Capital goods stocks such as BHEL and Larsen & Toubro fell 5.12 percent and 3 percent respectively on concerns the slowing economy could impact new orders.
Not all shares fell. Hindustan Petroleum Corp rose 1.1 percent while Indian Oil Corp gained 0.6 percent.