PSU banking stocks drag down Sensex, Nifty; analysts say consolidation likely to prolong

On February 12, the Sensex was down 523.00 points or 0.73 percent at 71,072.49, and the Nifty was down 166.50 points or 0.76 percent at 21,616.00. About 774 shares advanced, 2648 shares declined, and 58 shares unchanged.

Weakness in PSU banking stocks weighed benchmark indices Sensex and Nifty 50 lower on February 12. Analysts expect markets to observe consolidation for the next few days as valuations look stretched and investors approach the fag end of earnings season.

Sensex and Nifty declined 0.7 percent each to 71,072 and 21,616, respectively towards the end of February 12 trading session. Nifty PSU Bank was the worst sectoral performer as it declined more than 4 percent.

Going ahead, Nifty will prolong consolidation in the broader range of 22,000-21,400, which would help the index to form a higher base above 50 days EMA and eventually pave the way for the next leg of the up move, said analysts at ICICI Securities.

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"In the process, stock-specific action would prevail as we approach the fag end of the earning season. Thus, accumulating quality stocks on dips would be a prudent strategy to adopt as immediate support is placed at 21,400," they added.

Nifty PSU Bank index particularly hogged the limelight in Monday's trade as it slipped more than 4 percent led by losses in Central Bank, Maharashtra Bank, UCO Bank, and Indian Overseas Bank.

"Investors have started to book profits across PSU banking stocks as valuations look stretched. The majority of PSU bank stocks are trading at 1x price-to-book (PB) value at current levels," pointed out Vinod Nair, Head of Research at Geojit Financial Services.

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Meanwhile, broader markets underperformed benchmark indices, with Nifty Midcap 100 and Nifty Smallcap 100 indices declining 2 percent and 4 percent, respectively on February 12. Fear gauge, India VIX spurt over 5 percent to trade above the 16 level, indicating that volatility is on the rise.

Barring Nifty IT and Pharma indices that managed to eke out slim gains, all other sectors nosedived in the sea of red. Nifty Media and PSU Bank indices were the worst sectoral performers as they slipped over 4 percent each.

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