Volatile markets end flat; banks shine, IT whines

Markets ended choppy session of trade on a soft note led by selling pressure in IT stocks. Investors continued to remain cautious ahead of key data ahead. Industrial output data will be released on Wednesday.

Infosys to annouce its Q3 numbers on Thursday and Inflation data on Friday.

Nifty was very volatile throughout the day swinging between gains and losses.

The S&P CNX Nifty moved in 145 points range, it opened in the green, surged to 5843 and erased all gains in the last leg of trade due to panic selling as the index tested its key support of 5690 by tumbling to a low of 5698.

The Nifty bounced back from the immediate support of 5690 and ended at 5754, down nine points.

The Sensex closed at 19,196, down 28 points.

Markets continued to remain volatile as investors were cautious over expectations of interest rate hike later this month. Sukumar Rajah, MD & CIO -- Asian Equities, Franklin Templeton Investments said, "While higher prices will increase input costs, companies are likely to pass these costs on, if demand remains high.

However, inflation remains a key concern, given the implications for higher interest rates and drag on overall economic growth."

Other Asian markets ended on a mixed note, Japan's Nikkei Stock Average dropped 0.4% as exporters were hit by rising Yen. South Korea's Kospi Index was up 0.3%, China's Shanghai Composite gained 0.4% and Hong Kong's Hang Seng Index ended higher by 1%.

Banking stocks witnessed buying interest after falling consecutively for the past few sessions.

Axis Bank gained 3.3%, followed by State Bank of India, up 2.3% and Kotak Mahindra Bank, up 2.6%.

While banks were under pressure in the short term due to mismatch between the lending and deposit rate, analysts remained bullish on India's banking sector in the long run. Rajah said, "India remains underserved in terms of financial services, but the strong growth in personal incomes has led to increased demand.

"Given the low penetration of banking and financial services in India, we believe companies in this sector have huge growth potential."

BSE Realty index was the top sectoral loser, ended down, and dragged by Unitech, down 6.5%, Peninsula Land, down 6.7% and HDIL, down 5%.

Profit booking was seen in IT shares ahead of third quarter results flagged off by Infosys on Thursday, the IT bellwether dipped 2%, Patni Computers slipped 4%, and Financial Technologies declined 2.8%.

Top gainers on the benchmark were Hindalco Industries, up 3.5%, Bajaj Auto, up 3.4%, BHEL, up 2.4% and Reliance Communication, up 2.9%. Among the losers were Jaiprakash Associates and TCS, down 2.6% each, Jindal Steel lost 1.8% and Reliance Industries was off 1.6%.

Broader markets also ended in the red; the midcap and smallcap indices were down 0.7% and 0.9% each.

Market breadth was negative, 1,750 stocks declined for 1,110 advancing shares.