Indian markets are likely to open negative on Monday as Gift Nifty signals a flat start, dampening hopes for a year-end rally. The subdued outlook comes amid record Foreign Institutional Investor (FII) selling, which has hit unprecedented levels, marking the worst outflow since FII investing began in India.

FII Selling Pressure

The scale of FII outflows has reached alarming levels:

This stark contrast to the previous year highlights the severity of the current market situation. In the previous year, despite FIIs selling ₹1,21,210.00 crore through exchanges, net inflows remained positive due to ₹1,21,637.00 crore in primary market investments.

Economic Growth Projections

Despite the market headwinds, India's economic outlook remains positive. ICRA has projected encouraging growth metrics for the coming fiscal year:

ICRA anticipates a strong first half in FY2026, driven by factors such as festive demand, rural economic recovery, and seasonal upticks in mining and construction activity. However, growth is expected to moderate in the second half due to unfavorable base effects, export slowdown, and reduced government capital expenditure momentum.

Market Outlook

The Indian markets are poised for a challenging start to the week, with volatility expected to persist, particularly in mid- and small-cap segments. Tuesday's monthly settlement day for futures and options contracts on the NSE may further contribute to market fluctuations.

Despite the current challenges, analysts remain cautiously optimistic about future prospects. The robust GDP growth projections and potential for enhanced corporate earnings could provide positive catalysts for foreign investment flows in the coming year. However, until greater clarity emerges, the market is likely to continue its consolidation phase with stock-specific action remaining the dominant theme.

Investors and market participants are advised to closely monitor upcoming industrial production data and global cues for potential directional triggers in this uncertain environment.

Punjab National Bank shares are facing significant pressure in today's trading session, opening over 1.5% lower and trading around ₹118.00 following the PSU bank's disclosure of a major fraud case worth ₹2,434.00 crore to the Reserve Bank of India. The fraud involves loan accounts linked to the erstwhile promoters of two entities under the SREI Group, with the bank making complete provisioning for the outstanding amounts.

Current Market Performance

The stock's intraday movement reflects investor concerns over the fraud disclosure:

Fraud Case Breakdown

The reported fraud case encompasses borrowing irregularities by ex-promoters of two major financial entities:

The state-owned bank has fully provisioned for these outstanding amounts to mitigate the financial impact, as disclosed in its stock exchange filing.

Corporate Insolvency Resolution Process

Both SREI companies underwent resolution through the Corporate Insolvency Resolution Process under the supervision of the National Company Law Tribunal. The insolvency proceedings for the SREI Group NBFCs commenced in October 2021 following directives from the Reserve Bank of India, which had superseded the boards of both entities citing governance lapses and repayment defaults totaling nearly ₹28,000.00 crore.

SREI Infrastructure Finance, which began operations in 1989 as a construction equipment financier, saw its Resolution Plan successfully executed by National Asset Reconstruction Company Ltd., with NCLT approval received in August 2023.

Financial Position and Analyst Coverage

Punjab National Bank's provision metrics show the impact of ongoing asset quality management:

The Provision Coverage Ratio, a key indicator measuring how much of a bank's non-performing assets are covered by provisions, increased by 24 basis points year-on-year to 96.91%.

Analyst Recommendations

Current analyst sentiment on Punjab National Bank remains mixed:

Despite today's decline, the majority of analysts tracked by Bloomberg maintain a positive outlook on the stock, with 12 analysts recommending a 'buy' rating compared to 5 with 'sell' recommendations.