Indian stock markets experienced a mixed day on Monday. While the broader market edged slightly higher, state-owned banks faced significant losses.
The benchmark Nifty 50 index rose a modest 0.1% to 22,499 points, and the S&P BSE Sensex gained 0.3% to 74,081. However, the Nifty PSU index, which tracks state-owned banks, plummeted 4%.
This drop can be attributed to the Reserve Bank of India's proposed draft guidelines on project financing. These guidelines suggest that lenders may need to set aside higher provisions for infrastructure projects still under construction. This proposal worries investors, as state-owned banks have a significant exposure to such loans.
"Higher provisions could squeeze their margins," explained Siddhartha Khemka, Head of Retail Research at Motilal Oswal Financial Services. Companies like Power Finance Corp, REC, and IREDA, all heavily invested in infrastructure loans, saw their stocks fall between 4% and 10%.
On the other hand, the Information Technology (IT) sector provided some positive momentum to the market. Fueled by optimism surrounding potential U.S. rate cuts, IT stocks witnessed gains.
Overall, Indian markets displayed a cautious optimism, with gains in some sectors offset by losses in others.
Source: Reuters
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