Mumbai: Indian shares fell more than 2% in afternoon trade on Tuesday, in what traders called a knee-jerk reaction to North Korea firing dozens of artillery shells at a South Korean island.
“It’s a knee-jerk reaction to the tense situation in Korea,” said K.K. Mital, head of portfolio management services at Globe Capital in New Delhi. “If the situation escalates, then we will see a sharp impact on the markets in the region.”
At 12:53pm, the benchmark 30-share Bombay Stock Exchange was trading down 2.1% at 19,547.25 points, with all of its components declining.
Shares shed 0.9% on Tuesday in tandem with world stocks as renewed worries about Europe’s debt woes hurt global sentiment, while a local political corruption scandal also kept investors wary.
Banks, which have been one of the best sectoral performers year-to-date, bore the brunt of profit-taking.
Prime Minister Manmohan Singh faces questions over his handling of an alleged telecoms scam in the Supreme Court as parliament remains paralysed over demands by the opposition for a full probe.
The court is scheduled to hear the arguments of Singh’s representative on Tuesday.
“There are no positives around,” said Sunder Subramaniam, senior manager of institutional sales at brokerage Sharekhan. “Global cues are hurting. At the same time, the political scenario at home is no good.”
At 10:50am, the 30-share BSE index was down 0.9% at 19,777.62 points, with 27 of its components declining.
Foreign funds have poured $28.7 billion into Indian equities in the year to date, driving the benchmark up 13.1%, but their interest in recent sessions has not been consistent.
Oil and Natural Gas Corp dropped 0.5% even after the Economic Times reported the government has approved a two-for-one stocks split proposal by the state-run explorer ahead of a share sale next year. [ID:nSGE6AM028]
“The stock split was expected and seems to be already factored in the price,” Subramaniam said.
The banking sector index dropped 1.1%, after rising about 40% in 2010. Leading lenders State Bank of India, ICICI Bank and HDFC Bank were down between 0.6% and 1.2%.
Energy giant Reliance Industries shed 1.1%, taking losses in the year so far to 8%.
Mahindra & Mahindra fell 1.4% after the utility vehicle maker signed a deal to buy South Korea’s money-losing Ssangyong Motor Co for $464 million.
In the broader market, losers led gainers in a ratio of 1.6:1 on volume of 100 million shares.
The 50-share NSE index was down nearly 1% at 5,952,15.
Elsewhere, the MSCI’s measure of Asian markets other than Japan was down 1.4%, while Japanese markets were closed for a public holiday.
Bharati Shipyard rose 5.5% to Rs 241.70 after the shipbuilder said late on Monday it plans to acquire majority stake in south India-based Tebma Shipyards for Rs757.5 million.
MphasiS firmed 6.7% to Rs 604.75 as the software and back-office provider said after market hours on Monday its fiscal year 2010 net rose 20%.