Sensex slumps over 1.5 per cent; banks, Coal India drag

Mumbai: The BSE Sensex and Nifty fell more than 1.5 per cent on Friday after earlier hitting their seventh record high in the past eight sessions as lenders slumped after Bank of Baroda reported a big fall in earnings, while Coal India fell further on the government's stake sale. Gains this month have been led by the Reserve Bank of India's unexpected rate cut, which has raised optimism about the domestic economy.

Overseas investors have remained the backbone of the rally, with net purchases of $2.1 billion so far this month till Thursday, provisional exchange and regulatory data showed. "I think the fall was more to do with investors generating liquidity to participate in Coal India share sale. However, this will give more comfort in terms of valuations. We are cautiously optimistic," said Deven Choksey, managing director at KR Choksey Securities.

The Sensex was down 1.86 per cent to 29,122.90 points after earlier gaining as much as 0.54 percent to hit a record high of 29,844.16 points, surpassing the previous milestone hit on Wednesday. The Nifty fell 1.84 percent to 8,787.35, earlier gaining as much as 0.49 per cent to hit a fresh record high.

Bank shares slumped after Bank of Baroda Ltd, India's second-biggest lender by assets, booked a 69 percent fall in quarterly profit on Friday, due to higher provisions for bad loans and a surge in tax expenses. Meanwhile, Coal India fell 3.6 percent after the government priced its sale of a stake at a 4.5 percent discount to Thurday's closing price.

Coal India shares were down 8.4 percent for the week and headed for their worst weekly fall since the week ended Oct. 11, 2013.

The falls in bank shares and Coal India offset the 8.9 percent gain in HCL Technologies Ltd, which on Friday reported a 28 percent increase in December quarter earnings.