Sensex crumbles for 3rd day, private banks play spoilsport

Also, a massive plunge in the rupee's value, sustained foreign fund outflows and the developments around the Punjab National Bank scam led to a caution among participants.

Private sector lenders Axis Bank, Kotak Bank, Yes Bank, ICICI Bank, HDFC Bank saw their shares drop as much as 1.44 per cent today, but losses were capped by technology and metals stocks.

Software industry body Nasscom today sounded optimistic, saying the mood is upbeat and the trend is positive, which should translate into better business opportunities for IT companies.

One more silver lining was a recovery in PSU lenders, which recouped losses to end in the green on short covering.

"Market started off on a positive note due to short covering after the recent fall. But the gains did not sustain due to selling pressure in private banks and rising bond yield. Strengthening dollar and prospects of increased spending in technology set the IT index attractive. Expiry led volatility is expected in coming days and market participants are likely to stay away from the market," Vinod Nair, Head of Research, Geojit Financial Services Ltd, said.

Meanwhile, rating agency Fitch today placed state-run Punjab National Bank on 'Rating Watch Negative' (RWN), reflecting a possibility of downgrade following the USD 1.77 billion fraud at one of its Mumbai branches.

The fraud -- the biggest ever in the banking history -- has raised questions on both internal and external risk controls as well as the quality of management supervision considering that the fraud went undetected for several years, it said.

The rupee today depreciated by 68 paise to hit a three-month low of 64.88 (intra-day) against the dollar, adding to the negativity on domestic bourses.

The 30-share Sensex had soared over 186 points to hit a high of 33,960.95 in early trade but gave up its gains completely following a late sell-off, which dragged it down to a low of 33,657.89. The gauge finally ended at 33,703.59, down 71.07 points or 0.21 per cent.

It had lost 522.81 points in the previous two sessions.

The broader NSE Nifty closed lower by 18 points, or 0.17 per cent, at 10,360.40 after shuttling between 10,429.35 and 10,347.65.

Meanwhile, foreign portfolio investors (FPIs) sold shares worth a net Rs 895.79 crore yesterday, while domestic institutional investors (DIIs) were net buyers to the tune of Rs 586.52 crore, as per provisional data.

Among the Sensex components, M&M emerged as the biggest loser by falling 2.48 per cent, followed by Axis Bank 1.44 per cent, to Rs 531.70.

Other stocks that pulled down the key indices include Kotak Bank, Yes Bank, HDFC Bank, Reliance Industries, ICICI Bank, Sun Pharma, L&T, HDFC Ltd, Maruti Suzuki, ITC Ltd and Hindustan Unilever, falling by up to 1.09 per cent.

Coal India was the biggest gainer in the Sensex kitty, rising 1.90 per cent, followed by SBI which advanced 1.81 per cent.

Other gainers were ONGC, Hero MotoCorp, TCS, Infosys, Bharti Airtel, Tata Steel, Asian Paint, Wipro, Power Grid, Tata Motors, Bajaj Auto, Dr Reddy's, Adani Ports, NTPC, HDFC Ltd, Yes Bank and ITC Ltd, rising by up to 1.70 per cent.

PNB shares after remaining in the negative terrain for the most part of the session to hit 52-week low of Rs 111, managed to end a shade higher, snapping its four-day losing streak even as the Fitch placed the state-run lender on 'Rating Watch Negative' (RWN), reflecting a possibility of downgrade following the USD 1.77 billion fraud.

The stock had lost nearly 28 per cent in the past four sessions after the alleged PNB fraud came to light last week. Shares of Gitanjali Gems tumbled further by nearly 10 per cent to hit its lowest trading permissible limit for the day after the company came under the scanner of various investigating agencies following the PNB's massive fraud detection. Its stock has tanked over 56 per cent in 5 days.

Among the sectoral indices, realty fell 0.64 per cent, bankex 0.61 per cent, capital goods 0.30 per cent, auto 0.27 per cent, infrastructure 0.27 per cent and healthcare 0.26 per cent.

While consumer durables, metal, teck, PSU, power and IT sectoeral indices ended in the green.

In line with overall trend, the broader markets too succumbed to late profit-booking, pulling down the BSE small-cap and mid-cap indices by 0.15 per cent and 0.06 per cent, respectively.

Asian bourses, however, displayed a weak trend, led by Japan's Nikkei which fell 1.01 per cent, while Hong Kong's Hang Seng shed 0.78 per cent. Markets in China remained shut today.

European markets somewhat opened higher in their early deals. Frankfurt's DAX rose 0.29 per cent, while Paris CAC 40 gained 0.30 per cent. London's FTSE was down 0.03 per cent.