Analysis: SBI's Tier 1 capital, global economy overhang spooks market

The markets today closed on a bearish note with the BSE ending 226 points lower at 17,340, while Nifty was down 75 points at 5214. This negative outlook was primarily due to a sharp fall in European markets as well as poor performance by financial stocks after rating agency Moody’s cut the outlook for Indian Banks.

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State Bank of India, the country’s largest public sector bank, led the fall in the banking index, declining 7.2 percent after it announced its quarterly results. Despite a forecast-beating quarterly profit, a rise in non-performing assets battered investor confidence. But according to _Firstpost’_s investing Editor Shishir Asthana, what really spooked the market was the Tier I capital of the bank which has fallen to 7.47 percent, lower than the RBI prescribed norm of 8 percent.

Moreover, the bank’s poor asset quality also indicates that the PSU is in dire needs of government capital. However, so far, there are no signs that SBI will get government money any time soon, says Santosh Nair, Editor, Moneycontrol.com. In such a situation, the next three quarters are crucial for determining where the bank actually stands.

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Among other banking stocks - ICICI Bank and HDFC Bank were down 1.5-2 percent. The BSE Bank and Metal indices fell 2.5 percent each.

Most refinery stocks fell on rupee depreciation as the rupee breached the 50 level against the dollar.Infact IOC posted a loss of Rs 7,485 crore, thanks to a Rs 23,010 crore forex loss and under recovery of fuel prices. The company has asked for a budgetary support of Rs 8,200 crore. The stock today was down 4 percent today.

Auto stocks too lost the ground - Maruti Suzuki, M&M and Tata Motors plummeted 2.5-4 percent while Hero Motocorp gained 1 percent . Among the realty stocks DLF crashed 3.6 percent.

However, IT bellwether TCS jumped 1.8 percent after the company announced that it has won an order worth $2.2 billion from a UK-based company.

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