Mumbai: Shares fell 2.3% on Thursday, their biggest slide in nearly three weeks, amid concerns about slowing growth and the government’s inability to pursue reforms, and uncertainty over whether the euro zone can agree on how to resolve its debt crisis.
Traders said the Indian stock market would remain under selling pressure over the next one week on investor caution ahead of a slew of economic data.
“The market will be quite volatile for the whole week starting today. There will be pressure on the downside,” said R.K. Gupta, managing director of Taurus Asset Management.
“The market is playing in a very cautious zone and people would not like to take long positions because there are a lot of important issues coming up in the next five to six trading sessions,” Gupta said.
India’s industrial output and inflation data are due next week, while the central bank will review monetary policy on 16 December.
The 30-share BSE index closed down 2.3% -- its biggest single-day fall since 21 November -- at 16,488.24 points, after losing as much as 2.7%. All but five of its components were in the red.
The benchmark, which is one of the world’s worst performers this year, has fallen 19.6% since the start of the year.
Brokerage CLSA on Thursday lowered its 12-month target for the benchmark to 17,000 from 18,200, citing earnings cuts for the current fiscal year ending March and the next year.
Automakers were among the big losers after an industry body said they may just break even this year and warned it would cut its sales outlook..
Tata Motors, Maruti Suzuki and Mahindra & Mahindra shed 1.3 to 3.6%, pulling the BSE auto index down 1.6%.
Rising finance costs and increasing prices have deterred buyers in Asia’s third-largest economy in recent months, with car sales in April-November down 3.5% from the same period a year ago.
Worsening government finances and an announcement on Wednesday by the finance minister to suspend a policy decision to open the supermarket sector to foreign giants due to political opposition also hurt investor sentiment, traders said.
Top listed retailer Pantaloon Retail, which has been hoping to tie up with foreign giants, fell 5.8% after the government on Wednesday suspended plans to open its $450 billion supermarket sector to foreign firms.
Other retailers such as Vishal Retail and Shoppers Stop Ltd fell 6.2% and 1.36%.
Data showing India’s annual food inflation slowed was offset by concerns the industrial output had declined for the month of October, said Ambareesh Baliga, chief operating officer at brokerage Way2Wealth Securities.
Doubts about whether a European Union summit on Friday would be able to tackle the region’s debt problems also kept investors wary because the crisis could trigger foreign fund withdrawals from emerging markets such as India, dealers said.
Telecom stocks took a hit after downgrades on ratings of bluechip stocks in the sector.
Credit Suisse downgraded telecom giant Bharti Airtel to “neutral” from “outperform” and smaller peer Idea Cellular to “underperform” from “buy” as regulatory risks had not been priced in.
Telecoms market, the second-largest in the world after China, has struggled in recent years due to ferocious competition and a massive graft scandal, prompting authorities to overhaul the decade-old industry regulations.
Bharti and Idea fell 2.7% and 4.16%, respectively.
Infosys Ltd fell 1.3% after Bank of America Merrill Lynch downgraded the stock to “neutral” from “buy,” partly on greater exposure to discretionary IT spending..
The broader 50-share NSE index ended down 2.35% at 4,943.65 points. In the broader market, there were 3.6 losers for every gainer with 592.7 million shares changing hands.
The MSCI’s measure of Asian markets other than Japan was down 0.75%.
Capital goods giants BHEL and Larsen & Toubro fell 5.7% and 5.4%, respectively after Barclays Capital said the sector was undergoing a cyclical deceleration in orders and earnings.
“However, the sharp de-rating that has already occurred in valuations and earnings estimates moderates our bearish view,” Barclays said..
Crompton Greaves fell 3.6% after Morgan Stanley started coverage on the stock with an “underweight” rating and said it expects the firm’s earnings to be under pressure for the next 12-18 months.
Piramal Healthcare rose 3.6% after the managing director of its unit told Reuters the company was expecting to sell its investments in two real estate projects with an estimated 20% internal rate of return.