Mumbai: Automobiles shares ran out of gas in a choppy Indian market on Wednesday as investors expected higher fuel prices and rising borrowing costs to slow down demand in the world’s second-fastest growing major economy.
State-run refiners had raised petrol prices by about 8.6%, a record increase, on the weekend. The government, which controls prices of diesel and cooking gas, is also expected to raise prices soon.
Leading car maker Maruti Suzuki , top truck maker Tata Motors and utility vehicles maker Mahindra and Mahindra were down between 0.5 and 2.5%.
By 11:22am, the 30-share BSE index was trading down 0.09% at 18,120.20, a day after falling to its lowest close in eight weeks.
Half its components were declining.
“In the short to medium term, there will be pressure on markets due to worries about inflation and interest rate hikes. Monetary loosening is not going to happen in a hurry, which will keep the market’s upside capped,” Gajendra Nagpal, CEO of Unicon Financial, said.
Headline inflation in April was at 8.66%, data on Monday showed, and the prospect of rising energy costs is likely to keep pressure on the central bank to raise rates when it reviews policy on 16 June.
State Bank of India , the country’s top lender, fell as much as 2.6% after it posted an unexpected slump in quarterly profit on Tuesday.
Morgan Stanley, Goldman Sachs and Bank of America-Merrill Lynch cut their target price on the bank after the March quarter profit plummeted 99% on higher provisions, operating costs and taxes.
Morgan Stanley said in a note that credit costs could rise sharply if lending rates remain at current levels and the economy slows.
Bajaj Auto , the country’s second-largest motorcycle maker, was down 0.16% ahead of its fourth quarter results. Analysts on average expect the company to post a 23% rise in net profit to Rs 650 crore, according to Thomson Reuters Starmine.
Energy major Reliance Industries fell as much as 2% to 901.05 rupees. The stock, which has the heaviest weight on the benchmark index, has shed 13% this year, mainly on concerns over decline in gas output from its blocks off India’s east coast.
The 50-share NSE index was down 0.18% at 5,429.30 points. In the broader market, 821 losers were ahead of 482 gainers on volume of about 147.5 million shares.
Bajaj Finserv Ltd rose more than 4% after the company said late on Tuesday quarterly net profit soared 57 times from a year earlier.
Larsen & Toubro rose 1.06% after the company said it had secured a contract worth 14.5 billion rupees.