New Delhi: Shares fell nearly 2% on Monday as growing worries about the European sovereign debt crisis hit markets across Asia, and another possible domestic rate rise this week dented investor confidence.
Software services exporter Infosys Ltd and No. 2 lender ICICI Bank led the losses in the main index.
Tata Motors fell as much as 6.2% after the truck and car maker said late on Friday its group chief executive officer Carl-Peter Forster had resigned with immediate effect, only 18 months after joining the company.
At 9:51 am, the benchmark 30-share BSE index was down 1.76% at 16,570.19 points, with all but one of its components declining. The 50-share NSE index was down 1.82% at 4,967.45.
“On one side, there are concerns about Europe. And the second problem is possibility of another rate hike. These are the factors that will keep the market under pressure,” said K. K. Mital, head of portfolio management at Globe Capital.
The Reserve Bank of India (RBI) is widely seen delivering the last rate increase in its 18-month-long tightening cycle on Friday as inflation pressures continue to remain strong, a Reuters poll of 18 economists showed.
An increase would be the 12th in the current cycle and would take the repo rate, the central bank’s key lending rate, to 8.25%, where most economists see it staying until at least the end of the fiscal year in March.
Investors are also keeping an eye on July industrial output data due around 11:00 am. Industrial output should have risen 6.2% in July from a year earlier, slower than June’s 8.8% growth, moderated by successive interest rate rises, a Reuters poll showed.
Asian stocks fell and the euro sank to a six-month low against the dollar on Monday after the resignation of a top German European Central Bank board member cast further doubt on Europe’s ability to tackle its worsening sovereign debt crisis.
The BSE index is down nearly a fifth this year to be among the worst-performing equity markets in the world. Rising rates, concerns of slowing growth and a spate of corruption scandals that have delayed policy making have hurt sentiment in Asia’s third-largest economy.
Infosys fell 3.3% to Rs2,199.10, while larger rival Tata Consultancy Services was down 3.1% at Rs985. Europe is the second largest market for Indian software services exporters after the United States.
ICICI Bank was down 2.9% at Rs871.25, while top lender State Bank of India fell 2.7% to Rs1,899.60. Rising rates have curbed credit growth for the lenders.
Energy major Reliance Industries, India’s most valuable firm and the heaviest stock in the benchmark, was down 1.1% at Rs816.50.
The company said on Friday there was no evidence to suggest that costs in development of the country’s key natural gas field in the Krishna Godavari (KG) basin were overstated, after the government auditor criticized the firm.
In the broader market, there were almost five losers for every gainer with about 110 million shares changing hands.
Japan’s Nikkei fell 2.1%, while the MSCI’s measure of Asian markets other than Japan was trading 2.6% lower.
Stocks on the move
• State-run National Aluminium Co Ltd fell as much as 11.6% after a senior company official said insufficient power supply had forced the state-run firm to cut its daily aluminium output by about 6%. The shares later pared losses to 4.3% at Rs62.80.
• Leading car maker Maruti Suzuki was down 1.8% at Rs1,083.05. The chairman of its parent Suzuki Motor Corp said Maruti would not compromise on discipline demands that have led to almost two weeks of employee unrest at one of its factories, suggesting no immediate breakthrough in negotiations.