Japanese sell-off spooks markets; Nifty ends below 7,300

Weakness in the IT shares after Cognizant's weak guidance dent sentiment; PNB results pull down banking index

Markets fell for the second straight session after Japanese equities posted its biggest daily drop in nearly three years amid strengthening yen. Meanwhile, weakness in IT shares after Cognizant’s weak guidance for the three months ending March 2016 further dented the sentiments.

The S&P BSE Sensex closed 266 points lower at 24,021 and the Nifty50 slumped 89 points to end at 7,298 In the broader market, BSE Midcap and Smallcap indices closed lower between 1.2%-2%.

“Indian markets sold off following the weak Dow closing. Concerns regarding economic growth continued to weigh on global markets. The Nikkei closed sharply lower as the bond yields dipped below zero levels. The appreciation in Yen vs the USD is weighing on the Nikkei as it hurts Japan’s export driven economy. Apart from the global issues, earnings announcement of banks and metal companies have been very weak. IT stocks also came under pressure following the weak showing at the Nasdaq," said Sanjeev Zarbade, Vice President-Private Client Group Research, Kotak Securities in a note.

"Going forward, markets would be interested in Fed Guv Janet Yellen’s testimony in Congress on Wednesday and Thursday. The Chinese markets are closed this week. Crude oil price movement and economic data from China would be other factors to watch out for,” he added.

GLOBAL MARKET

Japan's benchmark index Nikkei posted its biggest daily drop in nearly three years with banks taking the brunt of the sell-off, while a stronger yen dragged down stocks across the board.

The Nikkei ended 5.4% lower at 16,085.44 points, its lowest closing level since Jan 21. Also, European equities are extending recent losses mirroring a sharp decline in the Japanese stocks. CAC 40, FTSE and DAX 100 are trading down between 0.1%-5%. 

TECHNOLOGY PACK

Shares of information technology companies cracked up to 4% after Cognizant Technology Solutions Corp. said that it expected little or no growth in the three months to March.

Tata Consultancy Services (TCS), Infosys, HCL Technologies, Tech Mahindra and Mind Tree lost up to 4%.

KEY STOCKS AND RESULT REACTION

Maruti Suzuki India fell nearly 2% after its total production fell 4.6% to 1.15 lakh units in January 2016 over January 2015. 

Meanwhile, Lupin closed over 4.5% higher extending its past two day’s gain after the drug maker reported better-than-expected net profit of Rs 601 crore for the third quarter ended December 2015 (Q3FY16). Sun Pharma added 2%. However, Dr. Reddy’s closed 3% lower ahead of its December quarter results.

Another stock that gained in the subdued market was GAIL closing nearly 2% higher after posting a net profit of Rs 664 crore against analyst expectations of Rs 456 crore.

Bharat Forge closed flat after its net profit for the December quarter fell 15% from a year ago due to lower net sales.

Punjab National Bank fell nearly 7% as net profit fell sharply by 93% to Rs51 crore in the third quarter of this financial year, from Rs774 crore in the year ago period on account of fresh slippages arising from the steel sector besides higher provisioning requirement as part of RBI norms.

"While results were expected to be bad, the quantum of rise in gross NPAs has surprised us. The Gross NPAs are up 37.7% q-o-q and now stand at 8.47% versus 6.36% in Q2FY16. This 210 bps rise in GNPAs doesn’t seem to be the end of the pain, as the bank is expected to report similar set of rise in NPA levels during Q4FY16 as well," said Vaibhav Agrawal, vice-president for banking research at Angel Broking in a note.

Motherson Sumi cracked 11% after the company missed its net profit estimates. Net profit rose 21% to Rs 307 crore in the quarter ended December 2015 as against Rs 254 crore during the previous quarter ended December 2014.

Among the prominent losers in the Sensex pack includes Coal India, Tata Motors, SBI and Cipla ending lower between 2%-5%.