Mumbai: Markets fell more than 3% on Monday to their lowest level in more than a year after Standard & Poor’s downgraded the US sovereign debt rating, triggering a flight from risky assets in regional stock markets.
Shares in leading software exporters Infosys and Tata Consultancy were among the biggest losers on fears that demand from the United States, the sector’s biggest market, will slow down amid the economic uncertainty.
In an indication the global equities rout is unlikely to abate soon, financial bookmakers predicted the main European markets would open down 1-2% on Monday and S&P 500 futures shed 2.6%.
The benchmark 30-share BSE index was trading down 2.21% at 16,921.16 points by 11.51am, with all but four of the index components trading in the negative territory.
The index had fallen as much as 3.2% earlier to touch its lowest level since June last year.
“The US debt rating downgrade and the related global uncertainty will certainly keep the Indian markets under pressure for some time,” said Kaushik Dani, a fund manager with Peerless Mutual Fund.
“There could be occasional bounce backs after the sharp selloffs but the outlook in the medium term is weak, with domestic factors like high inflation also not helping the market sentiment,” he said.
At the day’s lowest level, the BSE index is down 18% this year, making it one of the worst performers globally, as soaring inflation and interest rates forced investors to dump equities and seek shelter in safe havens like gold.
India’s benchmark gold futures on the Multi Commodity Exchange extended gains by more than 2% on Monday morning and hit a new peak of Rs 25,180 per 10 grams.
However, Goldman Sachs on Monday upgraded India to “market weight” from “underweight,” citing a likely turn in the macro cycle, lower oil prices, lower valuation, and policy reform.
Ratings agency Standard & Poor’s cut the US long-term rating by one notch from AAA on Friday, capping a week that saw $2.5 trillion wiped off companies’ values amid worries the U.S. economy was stalling.
Major Asian equity markets fell by 2-4% on Monday, with South Korea slumping more than 7% at one point.
Infosys, India’s No. 2 software services exporter, dropped 5.5% to Rs 2,448.90, while Tata Consultancy was down 5.4% at Rs 1,001 on worries that global firms may cut back on technology services in a weak economy.
Index heavyweight Reliance Industries’ shares fell 2.2% to Rs 775, taking its losses to more than a quarter this year amid concerns about slowing production from its showcase gas fields off India’s east coast.
Larsen & Toubro was trading down 2.1% at Rs 1,604 ahead of its quarterly earnings. India’s largest engineering and construction firm is expected to report an 8% rise in its fiscal first quarter profit.
Mahindra & Mahindra , which is expected to report a 5% rise in quarterly profit later on Monday, was down 1.1% at Rs 646.35.
The broader 50-share NSE index was trading down 2.1% at 5,101.90 points.
In the broader market, losers were ahead of gainers in the ratio of 13.6:1 on the NSE, on average volume of more than 250 million shares.
Vijaya Bank was down 4.4% after the lender cut its net interest margin forecast for this fiscal year to 2.75 to 2.80% and said maintaining growth was a challenge in the current economic scenario.
Britannia Industries Ltd was up 0.8% to Rs 473.85 after the company reported a 27% rise in its June-quarter net profit.
Aurobindo Pharma dropped 3.6% to 156.50 rupees after the drugmaker swung to net loss in the April-June quarter.