Markets were trading lower after opening in the red, tracking losses in Europe as the Greece debt concerns come to the fore. The Nifty declined 38 points, at 5,028 and the Sensex was down 116 points, at 16,820.
In Asia, the markets were trading lower led by losses in financial shares. The Hang Seng and the Shangai Composite index declined over 1% and 2% each. The Japan's Nikkei Stock Average was closed on account of the public holiday.
Markets analysts said that most of the negatives were priced into the market and there may be sideways consolidation until the second quarter earnings season kick starts. "Strong support for the index is placed at around the 5000-5020 levels,” said Emkay Research in the morning note.
Last week, the Reserve Bank of India hiked the interest rates by 25 bps to fight stubbornly high headline inflation levels. Economists expect the Whole Sale Price Index to remain at elevated levels, around 9% until December. Angel Broking in the mid-quarter monetary policy review said, "The RBI will preserve its hawkish stance to anchor inflationary expectation and we do not rule out further rate hikes until January 2012."
Foreign institutional investors remained net buyers in cash on Friday; they bought shares worth Rs 395 crore, while the domestic institutional investors were net buyers of Rs 40 crore in cash.
Over the weekend, the Finance Ministers from the Europe met in Poland to discuss ways of handling the debt crisis, the meeting however, made little headway in resolving the Greece debt issue. There are concerns that the European debt crisis may snowball into a full blown financial crisis, affecting Europe and other countries.
Going forward, markets will take cues from the Federal Reserve Open Market Committee meeting in the US, at the end of the week. Investors will closely watch for clues on whether the Fed will offer fresh round of stimulus or increase the maturity for bonds. Any policy decisions in India on the government front will also be closely watched.
Among individual stocks, GVK Power and Infrastructure rallied 5% after it said that it will pay $1.2 billion for buying a majority stake in three Australian coal mines owned by Hancock Group. From the oil & gas space, Reliance Industries was up 0.4%, GAIL advanced over 1% and ONGC was also up 1% after the government said that it may consider a proposal to benchmark oil prices to an average of high and low prices which are prevailing in the global markets.
On the sectoral front, banking and capital good indices were leading the losses.
Investors cashed out of Axis Bank, ICICI Bank and State Bank of India, each down almost 2% on worries that 12 consecutive rate hikes since March 2010 will dampen credit demand.
From the Capital Goods space, Usha Martin fell almost 2%, Larsen & Tourbo and Siemens were down over 1% each.
From the broader markets, the midcap and the smallcap indices were trading flat.
Major losers on the Sensex were DLF, down 3%, Larsen & Tourbo and Tata Motors slipped almost 2% each. Only three components on theSensex were trading in green. Sun Pharma advanced1% followed by Hero Motor Corp and ONGC, up 0.4% and 0.2% each.
Market breadth was negative, 710 stocks declined, for 532 stocks which advanced.
