Mumbai: Shares skidded more than 1% to their lowest level in four-and-a-half months on Friday, and were set to post their third weekly fall in four, with little respite seen to a reversal in foreign fund outflows.
An improving US economy is drawing investors away from emerging markets such as India, where rising interest rates are posing risks to corporate earnings.
Energy major Reliance Industries, which has the heaviest weight on the main stock index, led the decline shedding 2.2%.
Auto shares such as Mahindra & Mahindra, Tata Motors, Maruti Suzuki and Bajaj Auto fell between 2.1 and 6% as higher borrowing costs are expected to squeeze consumer spending.
HDFC Bank bucked the trend and rallied as much as 1.8%, a day after the country’s third-largest lender posted better-than-expected quarterly earnings.
By 11:31am, the 30-share BSE Index was trading down nearly 1% at 18,501.91 points with 22 of its components declining. It is down 2.7% this week.
At one point, it fell more than 1% to 18,444.75, its lowest since early September last year.
In the broader market, losers were more than four times the number of gainers on volume of 117 million shares.
The Nifty or NSE-50 index was down 0.8% at 5,559.60 points. It was trading below its 200-day moving average of 5,650, and its relative strength index was at 32.3 indicating close to an oversold position.
“Technically, the market looks oversold and a dead cat bounce is not ruled out right now,” said Arun Kejriwal, director of research firm KRIS.
“That said, we have been trading below 200-day moving average since yesterday. If it remains below this level over next couple of sessions and we fail to recover, a sharp selloff could again happen.”
Foreign funds have withdrawn $755 million from Indian equities this month, leading to a nearly 10% drop in the benchmark BSE index.
Soaring inflation and rate rises are starting to hit corporate margins in India, tempting more foreign fund managers to slash holdings in favour of markets that can better capitalise on the global economic recovery.
HDFC Bank was trading 0.4% up at Rs 2,059.80 after it reported late on Thursday a 33-percent rise in third-quarter profit, while warning that red-hot demand for loans might moderate with rising interest rates.
“With current gross stressed assets at 1.4%, the lowest in the system and best-in-class liabilities franchise, the bank is best placed to navigate pressure on asset quality and rising funding cost,” brokerage Edelweiss said in a note.
Bigger rivals State Bank of India and ICICI Bank were down 0.8% and 0.9% respectively.
State-run explorer Oil & Natural Gas Corp was up 2.1% ahead of its quarterly earnings announcement. A Reuters poll expects ONGC to post a 75% jump in net profit.
The company said late on Thursday, it had discovered shale gas reserves in West Bengal state in eastern India.
The MSCI’s measure of Asian markets other than Japan was down 0.5% while Japan’s Nikkei was trading 1.2% lower.
JSW Steel extended losses and slid 5.3% to Rs 914.15, a day after the country’s No. 3 steel maker said its consolidated net profit dropped 32%, hurt by higher cost of production.
Air conditioning firm Blue Star slumped 11.7% to Rs 348.95 after the company said post trading hours on Thursday its December quarter net profit fell 47%.