Mumbai: Benchmark equity indices tumbled to their lowest close in more than a month on Tuesday, dragged down by weakness in state-run bank stocks and investor anxiety ahead of the implementation of the goods and services tax (GST) from 1 July. Investor sentiment may stay weak for a while, said dealers.

BSE’s 30-share Sensex closed 179.96 points, or 0.58%, lower at 30,958.25 points. The National Stock Exchange’s (NSE) 50-share Nifty shed 63.55 points, or 0.66%, to close at 9,511.40 points. It was the lowest close since 25 May for both indices.

“The market will take a breather for now. We also have a strong supply in the primary market, so the flows will get absorbed there," said Nirav Sheth, head of equities at SBICAP Securities Ltd. “There is no near-term visibility on earnings for now. The GST implementation is bound to bother earnings in the near term."

So far this month, companies have raised more than Rs3,500 crore through initial public offerings (IPO), taking the total amount raised so far this year to Rs9,860 crore.

Other offerings in the pipeline include those by the National Stock Exchange of India Ltd, SBI Life Insurance Co. Ltd, ICICI Lombard General Insurance Co. Ltd and General Insurance Corporation of India. These are expected to soak up fund flows, analysts said.

Shares of state-run banks were hammered after the Reserve Bank of India (RBI) asked banks to set aside at least 50% of the loan amounts for accounts referred to bankruptcy courts. On unsecured loans, they will have to set aside the whole amount advanced.

“The noose has tightened on recognition and provisioning against bad loans," said Dipen Sheth, head of institutional research at HDFC Securities. “For some...the pain may be more intense."

On Monday, ratings agency Crisil Ltd said banks will have to increase provisioning by 25% this fiscal year, compared with 9% in the last, based on its assessment of haircuts, or sacrifice on the loan amount that they would have to make.

In Tuesday’s trading, NSE’s PSU Bank index shed the most among sectoral indices on the exchange. It dropped 3.38% to 3,328 points, its lowest close since 23 March, with all 11 constituents closing in the red.

Syndicate Bank and Punjab National Bank were the biggest losers, declining 5.82% and 5.35%, respectively. Canara Bank, Allahabad Bank, Bank of Baroda and Andhra Bank shed more than 4% each.

A third factor spooking the market is GST, with many expecting the impact to be negative on the economy in the short term.

“With just four days to go, the countdown to ‘one nation, one tax’ has begun," said Karthikraj Lakshmanan, senior fund manager, equities, BNP Paribas Mutual Fund. “While investors are optimistic about a unified tax code for the country, they are cautious about the near-term impact of its implementation."

According to Kotak Institutional Equities, the short-term impact of GST could be neutral to negative for the broader economy. “Production processes will likely take some time to align with the new framework as firms adjust to the input tax credit system and get a handle on the working capital requirements too," the securities house said in a note on Tuesday. “We would be cautious on economic growth for next one to two quarters."

Tuesday’s fall was broad-based. On the BSE, 26 stocks lost value for every 10 stocks that gained. Twenty of the 30 Sensex stocks closed lower. Top lender State Bank of India was the biggest loser among Sensex components, dropping 3.27%.