Indian shares inched lower on Monday as heavyweight banking stocks fell after a central bank report forecast that bad loans could soar due to a rise in pandemic-led debt burdens, with a record jump in daily virus cases also denting sentiment.
The Nifty fell 0.75% to 11,109.85 by 0424 GMT and the benchmark Sensex 0.79% to 37,833.9.
Banking stocks dropped after a report released by the Reserve Bank of India (RBI) on Friday evening said bad loans could rise to as much as 15% of the total loans by March 2021.
The report further said the COVID-19 pandemic could increase financial vulnerabilities, including corporate and household debt burdens in the case of a severe economic contraction.
“Because of the pandemic, loan growth has slowed and the moratorium has hit repayments. This is a double whammy for banks,” said Anita Gandhi, a director at Arihant Capital Markets in Mumbai.
“The RBI’s report cannot be ignored since the number is very high.”
The Nifty banking index fell 2.5%, with HDFC Bank shedding 3.3% and Axis Bank dropping 2.8%.
ICICI Bank fell 4.5% after the lender reported a profit that missed estimates for the quarter to June as its provisions for bad loans rose sharply.
Total cases of COVID-19 in India saw a record jump of nearly 50,000 infections over the last 24 hours and touched 1.44 million by Monday morning, according to government data.
Prime Minister Narendra Modi on Sunday had said the country needed to be extra vigilant” as the threat from the virus persisted.
Among gainers, the Nifty IT index rose 0.7% and was one of the few sectors to trade in the green. Tata Consultancy Services rose about 1%.
Bharat Petroleum Corp was the top gainer on the Nifty, rising 2.3%, followed by Asian Paints, which rose 1.9%.