New Delhi: Shares faltered after a stronger start on Tuesday as stubbornly high inflation and political uncertainty kept investors cautious, with a deepening euro zone crisis adding to the discomfort.
By 11:52am, the main 30-share BSE index was trading down 0.4% at 17,492.87 points, after initially rising 0.4%. Twenty-one of its components declined.
Oil and Natural Gas Corp rallied as much as 4% after the state-run explorer beat market expectations with a 60% jump in quarterly profit.
However, energy major Reliance Industries , lender ICICI Bank and software services bellwether Infosys fell.
Traders said the ruling coalition government was caught in a tight spot, with huge subsidies and falling revenue widening the fiscal deficit while high inflation has triggered opposition to increases in state-controlled prices of diesel and cooking gas.
State-run oil retailers raised petrol prices on Friday, triggering demands for a rollback from many political parties. The government may now delay a planned diesel price hike for fear of stoking inflation and inviting public wrath in state elections next year.
“We are also waiting for what happens in Europe. The domestic situation is also not very clear,” said D.D. Sharma, vice-president at brokerage Anand Rathi.
A threat to withdraw support from the government by a key ally -- the Trinamool Congress -- over the petrol price hike has added uncertainty to the domestic environment.
The government’s inability to raise diesel prices quickly will keep investors worried about the widening fiscal deficit, said Ambareesh Baliga, chief operating officer at brokerage Way2Wealth.
ONGC, India’s second-largest listed firm, was trading up 0.98% at 279.50 rupees after its September quarter profit was boosted by higher fuel prices and a lower subsidy burden.
ICICI, the country’s second-largest lender, was down 1.25% and mortgage lender HDFC shed 1% on concerns interest rates would hold firm due to high inflation.
The central bank has raised rates 13 times over 19 months, the last in October, but headline inflation remain near double digits.
Food inflation accelerated to a nine-month high in late October, driven mainly by costlier protein items, belying hopes of a respite in overall price pressures in the near term.
The main stock index is down 14.5% in the year to date, and the outlook remains hazy. In October, it had risen 7.6% thanks to foreign fund inflows of about $445.01 million.
Reliance Industries, which has the heaviest weight on the benchmark index, was down 1%, while Infosys dropped 0.4%.
Shares in Reliance Power were up 1.1% ahead of the company’s earnings.
The 50-share NSE index was trading down 0.47% at 5,259.50 points. In the broader market, there were four losers for every gainer on total volume of about 209 million shares.
The MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.37%, while Japan’s Nikkei was 1.27% lower.
SKS Microfinance fell as much as 10% to Rs 188.30 after the microlender posted a net loss in the September quarter.
Carborundum Universal rose as much as 11.5% to Rs 175 after the company said it had divested entire shareholding in Laserwords Pvt Ltd for Rs 500 million.
GlaxoSmithKline Pharma fell 3% to Rs 2,050 after the Indian drugmaker’s September quarter net profit dropped 7.6%.
• • •