Indian stock markets extended their losses for the third consecutive day on Wednesday, with bank stocks leading the sharp fall on both the BSE and the NSE.
The NSE Nifty plunged to a 20-month low during the day and fell below 7,200 on account of a sell-off in state-run bank stocks. The Nifty dropped to 7,186 in the afternoon trade before recovering to settle at 7,215.70, with a loss of 1.13 percent.
The S&P BSE Sensex opened below the psychological 24,000-mark and shed 384 points, or 1.60 percent, to slip to a low of 23,636, but trimmed losses later to end the day at 23,758, with a loss of 262 points, or 1.09 percent.
Public sector bank stocks that plummeted on the BSE included Punjab National Bank (down 8.99 percent), Bank of Baroda (down 5.28 percent) and State Bank of India (down 4.82 percent). Private sector banks such as Axis Bank, Yes Bank and IndusInd Bank also lost heavily.
State Bank of India will be declaring its third quarter results on Thursday.
Other top Sensex losers were Tata Motors, Adani Ports, HDFC and Cipla.
On the NSE, the correction was led by Punjab National Bank that fell by 9.12 percent, followed by Tata Motors, Bank of Baroda, Cairn and State Bank of India. The Bank Nifty underperformed the broader Nifty, registering a fall of 1.93 percent.
The market breadth on the NSE was skewed in favour of declines at 37, while 13 shares advanced.
Shares that bucked the trend on a day when the markets were deep in the red on Wednesday included Coal India, Larsen & Toubro, Maruti Suzuki and Reliance Industries.
Shares at 52-week low
Some of the shares that touched a new 52-week low included Just Dial, CESC, Federal Bank, Birla Corporation, Idea Cellular, Indian Bank, Bombay Dyeing and Nestle India.
Why bank stocks are falling
The Indian banking system is experiencing a lot of stress, with banks burdened with bad loans estimated at about $100 billion, reported NDTVProfit, citing analysts. State-run banks account for about 70 percent of these loans.
Two large public sector banks -- Punjab National Bank and Allahabad Bank -- reported disappointing results for the third quarter ended December 2015. While Allahabad Bank reported a loss of Rs 486 crore as against a net profit of Rs 164 crore in the corresponding period last year, its gross NPAs shot up to 6.4 percent of total advances from 5.26 percent, year-over-year.
Punjab National Bank registered a sharp decline in net profit to Rs 51 crore in the third quarter ended December 2015, down from Rs 774 crore in the corresponding period last year.
The bank's provisions for bad loans more than doubled to Rs.3,375 crore in the quarter from Rs.1,467 crore in the year-ago period. It also saw fresh slippages climb to Rs.13,842 crore from Rs.5,193 crore, as bulk loans to companies in sectors like steel, infra and power turned into NPAs.
Gold prices rise
The mayhem in stock markets has sparked a rally in gold prices, with the yellow metal gaining Rs 710 on 9 February to close at Rs 28,585. The metal has gained 12 percent since 1 January when it closed at Rs 25,510.