Indian shares posted their worst weekly fall in more than 6 months and closed 2.1% lower on Friday, as concerns over Ireland’s debt woes sparked a worldwide sell-off in riskier assets. Banks led the losses.
Asian stocks were also spooked by worries over China’s overheating economy, while subdued industrial output data in India also weighed on domestic sentiment.
The 30-share BSE index shed 432.20 points to 20,156.89, taking losses for the week to 4%The benchmark witnessed its worst single-day fall since 1 June, with all but two of its components losing ground.
Around 554 million shares changed hands on the exchange, 33% higher than its 30-day average volume.
“We had discounted the European crisis, but issues like Ireland are here now. We do not know the depth of the issue as yet though,” said Shashank Khade, executive vice-president of portfolio management services at Kotak Securities.
EU leaders reassured investors they would not be forced to writedown the value of their bond holdings in the event of a new euro zone bailout, easing pressure on Irish debt that has sparked fresh fears of contagion.
“The Fed’s (US Federal Reserve’s) QE2 was also factored in. So, collective factors are leading to a correction worldwide after the recent rally.”
World equities as measured by MSCI’s all-country index have risen nearly 15% since the end of August.
India’s benchmark index is up 15.4% so far this year, helped by net $28.5 billion foreign fund inflows into equities.
More than half of this investment has arrived since the start of September, driving up the 30-share BSE index 12.1% since then.
Annual industrial output growth in Asia’s third-largest economy slowed unexpectedly in September, led by a decline in capital goods production, bolstering the likelihood India’s central bank will keep rates on hold in coming months.
Leading lenders State Bank of India, ICICI Bank and HDFC Bank dropped between 1.7% and 4.6%, hurt by the decline in the broader market. DLF (DLF.BO) tumbled 5.5% after Credit Suisse downgraded the real estate firm to underperform from neutral, citing continued weak operating performance in the September quarter.
Tata Steel, the world’s seventh-largest steelmaker, and top private sector utility Tata Power declined nearly 4% and 1.4% respectively, ahead of their quarterly earnings announcement.
Sterlite Industries and Hindalco slipped 2.3% and 4.7% respectively, as metal prices tumbled with Shanghai futures hitting their downside limits and London copper off by more than 2% on talk of a possible Chinese interest rate rise.
Infrastructure firm Reliance Infrastructure and utility Reliance Power closed 1.4% and 3.6% lower ahead of their September quarter earnings.
The 50-share NSE index dropped nearly 2% to 6,071.65 points.
Elsewhere, the pan-European FTSEurofirst 300 declined 0.9% at 4:17pm, while the MSCI’s measure of Asian markets other than Japan shed 1.4%.
NESCO rose 4.3% to Rs600.05 after the company said its board approved a 10-for-1 stock split.
Gujarat NRE Coke slid 7.3% to Rs56.95 after the metallurgical coke producer reported a 51% fall in its September quarter net profit.
Educomp Solutions tumbled 8.2% to Rs512.60, as the software services firm’s consolidated September-quarter net profit nearly halved to Rs578.2 million.