Market at two-month low; Power Grid's recovery: What kept dealers busy today?

Indian equities began the September series F&O expiry week on a volatile note, ending at the lowest level in two months. However, the index managed to defend the crucial 17,000 mark, which acts as the 200-day moving average.

The NSE Nifty 50 index ended 40 points off the day's low of 16,978, shedding over 300 points. BSE listed companies have erased market capitalisation worth Rs 11 lakh crore over the last two trading sessions.

Sources within the dealing rooms tell CNBC TV-18 that a leading domestic insurance company has been an active buyer in Monday's trading session. Flows on the FII desk were mixed.

Financial stocks, that led the recovery from the June lows are now leading the underperformance as well. The Nifty Bank index is now down over 3,200 points from its all-time high. Dealers suggest that defensives like IT and Pharma stocks were well bid for in Monday's session.

Dealers expect volatility to remain elevated due to the Reserve Bank's credit policy as well as the F&O expiry.

"With so much of global macro headwinds at play, it is possible that we could see some amount of volatility or consolidation in the markets that we are witnessing, at this point in time. In the medium term, the growth equation for India as well as the earnings growth story and the return on equity story remains fairly intact," Shibani Sircar Kurian of Kotak Mahindra AMC told CNBC TV-18 in an interview.

UPL: India's largest agrochemical company ended lower for the second straight day. However, even as the stock has been under pressure and is 10 percent away from a 52-week low, dealers suggest that the stock has seen buy flows from HNI desks. They also suggest that the company may announce fund raising at a subsidiary level soon. The stock has recently been in the news for looking to increase the use of renewable energy to 30 percent of its global power consumption compared to the current 8 percent.

Power Grid: The stock recovered 7 percent from the day's low but ended with losses for the seventh straight day. Dealers have indicated that the recovery was led by domestic mutual funds who engaged in buying in the stock. The stock moved from the day's low after the Finance Ministry clarified that there is currently no proposal to have Power Grid acquire PFC's stake in REC. The Power Minister is likely to issue a clarification on this soon.

Sun Pharma: India's largest pharma company ended two percent lower on Monday despite dealing rooms indicating that there were buy flows from the FII desk. Monday's drop was Sun Pharma's second worst in a single day this month.