Even as the Punjab National Bank loan scam or the Adani NPA issue gave sleepless nights to stock market traders for the past few weeks, sentiments were further rattled on Friday as tax-related discrepancies came to light at India’s largest private sector company Reliance Industries. Despite calm in the global markets, the country’s key share indices Sensex and Nifty declined 1.5 per cent during the day.

The political storm that was kicked up by the withdrawal of TDP, a key ally of the ruling NDA dispensation, from the government over growing differences, too, was viewed negatively by the markets.

RIL, which has the highest weight in both the indices, fell 2.85 per cent in intraday trade. The stock attempted a pull back but closed with a decline of 1.29 per cent at ₹900 on the BSE. Another RIL group company Reliance Industrial Infrastructure fell 2.74 per cent.

Sensex, Nifty near 200-DMA

At close, the Sensex was down 510 points at 33,176. The Nifty fell 165 points to close at 10,195. Both the indices are down nearly 10 per cent from their life-time highs hit in January this year before the Nirav Modi-Punjab National Bank scam came to dominate the narrative in the domestic markets.

A little more than a 1 per cent fall in Sensex and Nifty from the current levels could take them below their 200-day moving average, a key technical support which, if broken, could lead to more institutional selling pressure, experts said.

“PNB, Adani and now RIL weighs on stock market sentiment,” said the promoter of a leading stock broking house in Mumbai. “RIL is a heavyweight, and any red flag against it or other such companies in the current scenario that is dominated by scams and crises in the banking system, could lead to panic.”

Reportedly, India’s top auditor CAG red flagged practices followed by RIL to prima facie lower its tax burden and pulled up the Income Tax Department for not being vigilant and efficient. The integrated audit found that RIL allegedly used its web of subsidiaries, resorted to merger and demerger of group entities, to book losses and make financial accounts untraceable to avoid paying crores of rupees in taxes. RIL has said it was paying all its taxes in accordance with law.

“Interestingly, the narrative in stock markets has moved from India recovery and growth story to scams and banking crises after the PNB news in February and last week’s Adani NPA issue. Any upside in stocks could get sold into,” said the head of the institutional trading desk at a fund house.