Stock market fall explained: Banks, hospital stocks drag Sensex and Nifty lower

The equity benchmark indices ended lower on Monday (October 12), with the Sensex falling 548 points to 71,925 and the Nifty 50 declining 157 points to 22,363.

Both benchmarks closed near the day's low, as banking stocks remained under pressure following the Reserve Bank of India's (RBI) measures on Cash Reserve Ratio (CRR) requirements, and hospital stocks saw a sharp sell-off in the final hour.

The Nifty Bank fell 339 points to 54,918, while the midcap index gained 47 points to close at 58,835, indicating relative outperformance by the broader market. The Sensex and Nifty Bank settled more than 100 points higher than their respective reference prices following the Common Auction Session (CAS).

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Why Did the Stock Market Fall Today?

1. Banking stocks remain under pressure after RBI measures

Banking stocks came under pressure following the RBI's measures on CRR requirements. The Nifty Bank ended 339 points lower at 54,918.

2. Hospital stocks fall on Supreme Court hearing

Hospital stocks saw a sharp fall in the last hour of trade, tracking the Supreme Court hearing on drug pricing.

3. Brent crude rises to $106 per barrel

Crude-sensitive stocks declined as Brent crude rose to $106 per barrel. IndiGo and Asian Paints fell nearly 1% each.

4. Reliance Industries hits 52-week low

Reliance Industries hit a 52-week low. ICICI Bank, Larsen & Toubro (L&T) and Reliance Industries were the top contributors to the Nifty's losses.

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5. DMart and Lenskart shares decline

Avenue Supermarts (DMart) fell over 4% amid margin pressure in its second-quarter results. Lenskart slipped over 4% following a large trade, with Alpha Wave likely to be the seller.

Capital market stocks ended higher, with Angel One jumping over 5% ahead of the Securities and Exchange Board of India's (SEBI) paper on the CAS. Suzlon Energy rose nearly 2% following a positive brokerage note. Goodluck India surged over 14% following its proposed restructuring announcement.

The rupee strengthened by more than 1% against the US dollar to below 96 per dollar following the RBI measures.

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The Midcap Index rose 47 points to 58,835, outperforming the benchmark indices. However, overall market breadth favoured declines, with the advance-decline ratio at 1:1.

From the Sensex basket, Hindustan Aeronautics Ltd, Cipla Ltd, Kotak Mahindra Bank Ltd, Mahindra & Mahindra Ltd and HCL Technologies Ltd were the major gainers. ITC Ltd, UltraTech Cement Ltd, Larsen & Toubro Ltd, Bharti Airtel Ltd, Coal India Ltd and Tata Consultancy Services Ltd were the biggest laggards.

Pankaj Pandey, Head Retail Research, ICICI Securities, on Defence, said, "In defence, the overall sense is that a lot of these smaller private players are expected to do well. So recently, we sort of initiated coverage on Apollo Micro Systems. This company, making a subsystem, is going to be a lot more integrated player, and we expect a good set of numbers there in this company.

Zen Technologies, another company which we like, the second half of last year is when they got a number of orders. Now execution of that is expected to start this year, so that is also looking interesting to us. We have initiated coverage on Centum Technologies, which again derive nearly 50% of the revenues from the defence. That is another stock on which we are writing.

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Dynamatic Technologies is another stock, while their other businesses are not doing so great, but the aerospace business, which nearly contributes half of their revenues, the margin profile is lot more better, and we feel that as and when the segment keeps getting bigger, you will see EBITDA margins also improving for that particular term.

These are some of the names of the defence, and my sense is that, like Defence Secretary highlighted, we are expecting a decent hike in the defence procurement budgets."