Markets extend meltdown as Karnataka tussle sours risk appetite

Benchmark Sensex plunged over 232 points to end at 34,616.13, while the broader NSE Nifty lost almost 80 points to close at 10,516.70.

Investors were wary after BJP's B S Yeddyurappa resigned as the chief minister of Karnataka on Saturday minutes before he was to face a floor test, paving the way for the JD(S)-Congress combine to form the government.

A declining rupee, elevated crude oil prices and sustained foreign fund outflows added to the gloom, brokers said.

Sentiment got another jolt after Moody's Investors Service downgraded PNB's rating, citing the impact of the recent fraud on its capital as well as weak internal controls.

The 30-share Sensex had opened strong and advanced to a high of 34,973.95 in early trade but gave up its gains following a widespread sell-off, which dragged it down to 34,593.82.

The gauge finally ended at a nearly one-month low of 34,616.13, down 232.17 points or 0.67 per cent. This is its weakest closing since April 25, when it had finished at 34,501.60.

The gauge has now lost 940.58 points in five days.

The broader NSE Nifty closed lower by 79.70 points, or 0.75 per cent, at 10,516.70, after hovering between 10,621.70 and 10,505.80.

"Short-term chaos from state election results and weak currency due to surge in oil price led the market to come down.

"Investors' sentiment on mid and small cap index dampened due to high valuation and lower than expected quarter results. Continued outflow of foreign funds have a key role in the current consolidation as domestic macro looks fragile," said Vinod Nair, Head of Research, Geojit Financial Services.

Meanwhile, foreign portfolio investors (FPIs) sold shares worth a net Rs 166.15 crore, while domestic institutional investors (DIIs) were net buyers to the tune of Rs 149.58 crore  on Friday, as per provisional data.

Private sector lenders Yes Bank, Axis Bank, Kotak Mahindra Bank and HDFC Bank witnessed heavy selling pressure, dropping as much as 3.27 per cent.

Among the Sensex components, Sun Pharma emerged as the biggest loser by falling 4.50 per cent, followed by Dr Reddy's at 4.23 per cent.

Other losers were Tata Motors, Hero MotoCorp, Tata Steel, Bajaj Auto, HDFC Ltd, HUL, Wipro, NTPC, M&M, Maruti Suzuki, Adani Ports, Asian Paints, Bharti Airtel, L&T, RIL and Infosys, falling by up to 2.85 per cent.

SBI was the top index gainer, spurting 2.47 per cent, followed by TCS which advanced 1.59 per cent.

Coal India, ICICI Bank, ONGC and Power Grid also finished with gains of up to 1.26 per cent.

Among the sectoral indices, realty fell 3.11 per cent, healthcare 2.55 per cent, infrastructure 2.08 per cent, consumer durables 2.07 per cent, auto 1.92 per cent, metal 1.59 per cent, power 1.06 per cent, FMCG 0.85 per, capital goods 0.79 per cent and bankex 0.32 per cent.

PSU, IT, oil and gas and teck ended in the green.

In line with the overall trend, the broader markets too remained under selling pressure. The BSE small-cap and mid-cap indices fell by 2.20 per cent and 1.64 per cent, respectively.

Shares of Bhushan Steel climbed 4.88 per cent after the National Company Law Appellate Tribunal (NCLAT) today declined to stay Tata Steel's acquisition of debt-laden firm under the corporate insolvency resolution process.

On the global front, Asian markets rose after the US and China agreed to drop their tariff threats while they work on a wider trade agreement, though lack of specifics tempered high expectations.

Hong Kong's Hang Seng rose 0.60 per cent, while Shanghai Composite Index gained 0.64 per cent. Japan's Nikkei too was up 0.31 per cent and Singapore gained 0.52 per cent.

European markets were mixed in their early deals, with Frankfurt's DAX falling 0.28 per cent, while Paris CAC 40 rising 0.69 per cent. London's FTSE too was up 0.80 per cent.