Sensex slips below 17K, banking shares weigh

Markets slipped almost 2%, snapping three sessions of gains on mounting concerns of global growth. The Sensex closed at 16,867, down 299 points, and the Nifty ended at 5,060, down 94 points.

Earlier in the day, the Nifty touched a high of 5,164 for a brief period, but gave up all the gains as $447 billion package by the United States President, Barack Obama failed to entice investors. Worries of slowing global growth accelerated as the European Central Bank and the US Federal Reserve steered clear from announcing any monetary support. Profit booking seeped in during the afternoon session after European indices plummeted.

Markets in Asia gave up early morning gains; losses in property and manufacturing stocks dragged the indices lower. The Nikkei Stock Average ended down 0.6%, while the Hang Seng and the Shanghai Composite indices ended marginally lower, down 0.6% and 0.2% each. European markets snapped two sessions of gains on the back of losses in banking shares; FTSE, CAC and DAX were trading lower by 1% each.

Back in India, global uncertainties continued to weigh on the macro-data. The merchandise exports grew 44% to $24.3 billion in August compared to same time last year, but the volumes declined 17% versus the previous month due to global uncertainties.

The markets will take cues from the Reserve Bank of India policy on September 16 and Federal Reserve Chairman Bernanke’s meeting at end of the month. Analysts said that the markets may see a rough patch as growth is expected to slow down further in the second quarter.

“The short and medium term trend is bearish and all eyes are now on the RBI’s monetary policy and its tone in the coming week. The Nifty is likely to trade with a downward bias in the range of 5100-4950,” said Shanu Goel-Senior Research Analyst from Bonanza Portfolio.

Back in India, among the frontline stocks – Reliance Industries, Infosys and ICICI Bank declined between 2% and 3% each, dragging the Sensex down by 130 points.

Only seven components on the Sensex were trading in the green - Hindustan Unilever and Hero Motorcorp advanced over 2% each, and ONGC was up 0.3%.

Investors cashed out of banking shares ahead of the RBI policy next week. Axis Bank fell over 4%, State Bank of India and IDBI Bank fell around 3% each.

Fears of recession in the United States and the snowballing debt crisis in Europe continued to weigh on the IT index. TCS declined 2 per cent, Patni Computers and Mphasis declined almost 3% each.

Metal shares also lost sheen; Hindalco plunged over 5% after Morgan Stanley downgraded the stock to underweight from overweight. SAIL and Sterlite also slipped over 5% respectively.

From the broader markets, the midcap and the smallcap indices fell almost 0.8% each.

The market breadth was negative; 1,663 stocks declined for 1,292 advancing shares on the BSE.