Banking stocks give up recap gains, drag down Sensex 236 points experts see more pain ahead
The Punjab National Bank fraud hit the banking and jewellery stocks continued their slide this week today with the banking stocks now plumbing to their 52-week lows.
They have dragged the benchmark indices too, with the Sensex losing 236.10 points, or -0.69%, to 33,774.66 while the wider Nifty dropped 73.90%, or -0.71% to close at 10,378.40.
Expert says the stocks are likely to fall more.
On Monday, shares of Union Bank of India dropped 7.19%; Bank of Maharashtra 6.79%, Syndicate Bank 6.45%, Allahabad Bank 6.30% and Bank of Baroda 5.48%.
PNB has dropped 28% since the fraud came to light on February 14, losing Rs 10,976 crore of market capitalisation.
In collateral damage, stocks of diamond cutting, jewellery and precious metal companies plunged though they have nothing to do with Nirav Modi or the fraud.
Gitanjali Gems, whose promoter Mehul Choksi has been named in the fraud, continued to fall for the fourth day, dropping 10% on Monday.
The Nifty PSU banking index has lost a total of 5.94% since February 14, when the fraud came to light, while the BSE Bankex fell by 1.31%.
"PNB is the most speculated stock in the market now. Nobody knows what is going to happen or the entire details and hence they are withdrawing themselves from the stock," Arun Kejriwal, founder of Kejriwal Research and Investment Services, said.
However, the private sector banks have been relatively unharmed.
"So far private sector banks are not affected. But I am sure there would be some repercussions on them as well. It is just a matter of time," Kejriwal said.
Among the other bank stocks that have shed value since February 14 are Allahabad Bank (-15.90%), Union Bank of India (-13.88%), UCO Bank (-9.14%) and State Bank of India (-7.23%).
Chandan Taparia, derivatives and technical analyst at the Motilal Oswal Securities, said, "All the gains made during bank recapitalisation have been wiped out. The underperformance of the broader market is also the reason for the falling PSU bank stocks. The fraudulent transaction case of PNB is proving to be sentimentally bad for the PSU bank stocks. PSU mid-cap bank stocks have declined about 7% to 8%. But a sharp correction will happen in some time."
The worst hit has been Gitanjali Gems, which lost 46.22% since February 14. Other most affected companies include Tribhovandas Bhimji Zaveri (-10.36%), Goldiam International (-8.59%), PC Jeweller (-7.88%) and Rajesh Exports (-3.30%). PC Jeweller's market capitalisation has tanked by Rs 1,195 crore.
"The private sector banks have outperformed. YES Bank and Axis Bank have escaped the negativity, including the global cues. Overall, private sector banks have a positive sentiment than the PSU banks," Taparia said.
Both the experts said the jewellery stocks will be affected due to the PNB fraud.
In the broader market, the mid-cap and small-cap both ended in the red, falling 1.05% and 0.99%, respectively. The biggest losers on BSE were Tata Steel (-5.82%), Dr Reddy's (-2.75%), Adani Ports (-2.72%), Larsen & Toubro (-2.35%) and Mahindra & Mahindra (-2.24%). Among the gaining stocks on BSE were Coal India (0.54%), Infosys (0.46%), Kotak Bank and RIL (0.45%) and Axis Bank (0.32%).
Meanwhile, the foreign portfolio investors sold shares worth Rs 895.79 crore and domestic institutional investors purchased shares of Rs 586.52 crore on Monday, according to the provisional data.
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PNB has dropped 28% since the fraud came to light on February 14, losing Rs 10,976 crore of market capitalisation.
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