Mumbai: Indian shares fell 1.3% on Tuesday, as military tensions in Korea, a local corruption scandal and Ireland’s financials troubles spooked investors.
Traders said the urge was to take money off the table when the going was good, and the market was vulnerable to a pullback after rallying for seven of the past nine months.
Financials, which had been among the biggest gainers this year, attracted profit-taking, while laggard energy major Reliance Industries slipped further as the Korean exchange of fire added to the market jitters.
“There were problems as it is with Europe issues coming up again and China’s tightening measures. Korea added to the fears,” said Vaibhav Sanghavi, director of Ambit Capital. “Such events prompt investors to take risk off the table. There is a negative bias for the market in the near term.”
The 30-share BSE index dropped 1.33%, or 265.75 points, to 19,691.84. Only two of its components managed to close in the positive territory. The 50-share NSE index shed 1.25% to 5,934,75.
Photo: AP; Graphic: Ahmed Raza Khan/Mint
The benchmark fell as much as 3.1% at one stage following the Korean firing to its lowest level since Sept. 15.
North Korea fired dozens of artillery shells at a South Korean island, setting buildings on fire and prompting a return of fire by the South, Seoul’s military and media reports said.
Foreign portfolio funds have snapped up a record $28.7 billion of Indian equities this year, helping the benchmark stock index climb nearly 13%, and the market could be vulnerable if the tensions rattle investors.
“If the situation escalates, then we will see a sharp impact on the markets in the region,” said K.K. Mital, head of portfolio management services at Globe Capital in New Delhi.
More than two shares declined for every share that advanced in the broader market on moderate trading volume of 405 million shares.
There were also political worries as the Indian prime minister faced questions in the Supreme Court on Tuesday over his handling of an alleged multi-billion dollar telecoms scam, while the parliament remained paralysed over demands by the opposition for a full probe.
Banks, which have been the second-best sector performer for 2010 after healthcare, declined as investors booked profits.
The banking sector index shed 1.3%, but is up 38.4% year-to-date. Top lender State Bank of India fell 2.8%, while rival ICICI Bank lost nearly 2%.
Reliance Industries, which has the highest weighting on the Sensex, shed 1.7%, taking its losses so far this year to 8.7%.
The negative sentiment also weighed on Oil and Natural Gas Corp, which fell 2% shrugging off an Economic Times report the government had approved a two-for-one stocks split proposal by the state-run explorer.
Elsewhere in the region, China’s Shanghai Composite Index and Hong Kong’s Hang Seng dropped 1.9% and 2.7% respectively, while the Korea Composite Stock Price Index (KOSPI) lost 0.8%.
The MSCI’s measure of Asian markets other than Japan was down 2.3% by 1023 GMT, while the FTSEurofirst 300 traded 0.6% lower.
Bharati Shipyard rose 4.2% to Rs 238.55 after the shipbuilder said late on Monday it plans to acquire majority stake in south India-based Tebma Shipyards for Rs 757.5 million.
Jain Irrigation rose 6.5% to Rs 228.10 as Morgan Stanley upgraded the irrigation systems maker to “overweight” from “equal-weight” and raised the target price to Rs 250 from Rs 188.