The S&P BSE Sensex and NSE Nifty 50 Indexes continue to trade with a negative bias owing to weakness in banking and financial services shares after the financial irregularities at CG Power and Industrial Solutions again highlighted the stress faced by banking and NBFC sector, analysts said. The Sensex dropped as much as 182 points while the Nifty 50 Index fell below important level of 11,000. ICICI Bank, Reliance Industries, ITC, HDFC and IndusInd Bank were top drags in the Sensex so far.

As of 1:00 pm, the Sensex traded 123 points or 0.3 per cent lower at 37,277 and the NSE Nifty 50 Index was down 0.5 per cent or 53 points at 11,001.

CG Power and Industrial Solution shares dropped by maximum daily limit of 20 per cent after the company's Risk and Audit Committee (RAC) said that its total liabilities were understated by Rs 1,053.54 crore as of March 2018 and by Rs 601.83 crore as of April 2017.

"The markets witnessed a technical bounce-back in the past few sessions. News of financial irregularities in CG Power and Industrial Solutions has triggered fresh concerns among investors. Banking and non-banking financial companies' businesses are already facing a slowdown," said Jaikishan Parmar, senior equity research analyst-BFSI, Angel Broking.

"A lot of mutual funds have stakes in CG Power. This development brings back concerns of a contagion of NBFC crisis spreading to other sectors," he added.

Eight of 11 sector gauges compiled by National Stock Exchange were trading lower led by the Nifty PSU Bank Index's 2.6 per cent fall. Nifty Realty, Metal, Private Bank, Bank and Financial Services sector gauges also fell between 0.8-1.9 per cent each.

Mid- and small-cap shares were underperforming their larger peers as the Nifty Midcap 100 Index fell 1.2 per cent and Nifty Smallcap 100 Index dropped 1 per cent.

Yes Bank was top loser in the Nifty 50 basket of shares. The stock fell over 5 per cent to Rs 71.50. Indiabulls Housing Finance, Britannia Industries, IndusInd Bank, UltraTech Cement, Bajaj Finserv, Eicher Motors, Coal India, State Bank of India and Bajaj Finance were also among the losers.

On the flipside, Maruti Suzuki, Infosys, HCL Technologies, Dr. Reddy's Labs, Hero MotoCorp, Tata Consultancy Services and Mahindra & Mahindra were among the gainers.

Market breadth was tilted in favour of sellers as 1,204 shares were declining while a little over 500 shares were gaining on the NSE.