Indian shares fall as banking contagion fears sour mood

People walk past the Bombay Stock Exchange (BSE) building in Mumbai
People walk past the Bombay Stock Exchange (BSE) building in Mumbai, India, November 4, 2020. REUTERS/Francis Mascarenhas

BENGALURU, March 20 (Reuters) - Indian shares closed lower on Monday with investors fretting about contagion risks in the global banking system, as relief from a historic Swiss-backed acquisition of troubled Credit Suisse by UBS Group turned out to be short-lived.

The Nifty 50 index (.NSEI) was down 0.65% at 16,988.40, while the S&P BSE Sensex (.BSESN) closed 0.62% lower to 57,628.95.

Eleven of the 13 major sectoral indexes declined with high weightage financials (.NIFTYFIN) and information technology (IT) (.NIFTYIT) falling 0.69% and 1.43%, respectively.

Over the weekend, UBS said it will buy Credit Suisse for 3 billion francs ($3.2 billion).

Soon after the announcement, global central banks came out with statements to reassure markets, but to no avail.

"Investor sentiment has been hurt by worries over the global banking system," Anita Gandhi, director at Arihant Capital Markets said.

"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."

At least two major banks in Europe are examining scenarios of contagion, two senior executives close to the discussion told Reuters.

Market participants are keenly awaiting the Fed policy decision on Wednesday. Futures on interest rate are pricing in about a 60% chance of a Fed rate hike. FEDWATCH

Among individual stocks, most Adani group firms fell on a report that the group suspended work on a $4.2 billion petrochemical project at Mundra in Gujarat.

Reliance Industries, the largest stock in Nifty 50 in terms of market capitalization and weightage, fell nearly 1% to a fresh 52-week low and extended losses for the eighth session after government sources hinted at plans to extend restrictions on the export of diesel and gasoline beyond March.

($1 = 82.5200 Indian rupees)

Reporting by Bharath Rajeswaran in Bengaluru; editing by Eileen Soreng, Nivedita Bhattacharjee and Dhanya Ann Thoppil

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