The Nifty 50 fell nearly 2% last week, its biggest drop in nearly a month.
Over the weekend, UBS said it will buy Credit Suisse for 3 billion francs ($3.2 billion), and assume up to $5.4 billion in losses, in a deal engineered by Swiss authorities.
Soon after the announcement, global central banks came out with statements to reassure markets. But investor sentiment remained fragile.
At least two major banks in Europe are examining scenarios
of contagion, two senior executives close to the discussion told
Reuters.
"Investor sentiment has been hurt by worries over the global
banking system," Anita Gandhi, director at Arihant Capital
Markets said, adding that the only silver lining is that Indian
lenders are in good health.
"While the UBS takeover of Credit Suisse offers
temporary relief, the real variable is the Fed's handling of the
concerns in the financial sector."
Forty-four of the Nifty 50 constituents logged losses. Most Adani stocks fell on a report that the group suspended work on a $4.2 billion petrochemical project at Mundra in Gujarat. Among individual stocks, Tata Consumer Products fell over 2% after the company dropped acquisition talks with Bisleri. Cochin Shipyard advanced over 6% after winning a 5.50 billion rupees order for zero-emission feeder container vessels from Samskip Group.
The volatility in domestic markets and foreign outflows will
continue until clarity emerges in the banking sector, two
analysts said. Volatility index surged to 16.50, its
highest since Feb. 1, the day of the union budget.
($1 = 82.5200 Indian rupees)
(Reporting by Bharath Rajeswaran in Bengaluru; editing by
Eileen Soreng, Nivedita Bhattacharjee and Dhanya Ann Thoppil)
