Indian markets drop 1% even as global equities rally

India’s benchmark equity indices declined nearly one per cent on Friday even as global peers rallied as widening of the current account deficit, the $2-billion fraud at Punjab National Bank (PNB) and index provider MSCI’s warning weighed on investor sentiment.

The Sensex fell 0.8 per cent to 34,010, while the Nifty50 index fell 0.9 per cent to 10,452.3, its lowest close since January 3. The losses came despite global markets gaining by more than a per cent as the yield on the 10-year US Treasury softened below 2.9 per cent.

Most global markets posted their biggest weekly advance in nearly a year but Indian equities ended the week unchanged.

Mirroring global cues, the Indian markets, too, started with gains, with the Sensex gaining as much as 211 points to 34,297. However, the index succumbed to selling pressure amid a spate of bad news.

India’s current account deficit widened the most in four years in January as imports surged and export growth slipped, a report that came after Thursday’s market close showed. Banking stocks — which have a significant weight in the benchmark index — declined as investors feared that the PNB fraud could spread.

“The fraud is clearly weighing on investor sentiment. The amount involved is large. Also, there are fears whether this is restricted to just one branch of one bank or many other branches and banks. Just when investors thought the bad asset quality problem was bottoming out for the banking sector, a lot of new questions are lingering for investors,” said Rajeev Thakkar, ýchief investment officer, ýPPFAS Mutual Fund.