New Delhi: Markets fell 1.8% on Friday to log their fifth straight weekly loss, as investors globally turned cautious ahead of a crucial speech by US Federal Reserve chief that could give some clarity amid nervousness about the outlook for the world’s biggest economy.
Energy major Reliance Industries and lenders led the losses in the benchmark index that fell to its lowest close in nearly 19 months.
Shares in firms controlled by billionaire Anil Ambani plunged after the National Stock Exchange said it will exclude financial services firm Reliance Capital from the blue chip Nifty index from 10 October.
US Fed chairman Ben Bernanke is due to address a gathering of central bankers from around the world at Jackson Hole, Wyoming, at 1400 GMT. A year ago, in the same place, he had opened the door to a second round of quantitative easing.
Hopes that he would announce a third-round of asset buying this year have begun to fade.
“Now it is expected that QE3 is unlikely to be announced, or if it is announced, the quantum may be much lower because QE2 had led to high inflation,” said R.K. Gupta, managing director at Taurus Asset Management in New Delhi.
European shares fell on Friday as markets played down chances of a major shift towards further economic stimulus from Bernanke. Asian markets were mixed.
Main 30-share BSE index closed 297.50 points lower at 15,848.83, its lowest close since February last year. All but three of the index’s components declined.
It fell 1.8% on the week to log its fifth straight weekly loss, which was the longest stretch of losses since October 2008, after Lehman Brothers’ collapse hit world markets.
The index is down nearly 23% this year and is among the world’s worst-performing equity markets. Local concerns including rising interest rates that have started hurting corporate profits and slowing economic expansion have also weighed on stocks.
Foreign funds have been net sellers of more than $2 billion of local shares this month after purchasing a net $1.7 billion of equities in July.
The 50-share NSE index fell 1.9% to 4,747.80 points. In the broader market, there were more than six losers for every gainer on a total volume of 594 million shares.
Shares in Reliance Industries, which has the heaviest weightage in the main index, fell sharply in the last hours of trade in a broader market sell-off to close 4.5% lower at 719.40 rupees, its lowest close since late March 2009.
The energy major has lost nearly a third of its market value this year amid worries over slowing gas output.
Reliance, for long the darling of Indian investors, was once again knocked off its position as India’s most valuable firm. At Friday’s close, state-run oil explorer Oil and Natural Gas Corp toppled Reliance to become the top the chart at $51.6 billion.
Reliance had a market value of about $51.1 billion. Last week, Coal India pushed Reliance off its four-year-old perch to claim the top spot, before Reliance reclaimed it.
Anil Ambani’s Reliance Capital plunged 12% to Rs 344.20, while his group’s telecoms firm Reliance Communications lost 10.9% to a record closing low of Rs 72.20.
“There is a fear that over a period of time Reliance Communications and Reliance Infrastructure could also be excluded from Nifty as they have been losing market capitalisation,” Taurus’ Gupta said.
Foreign investors usually prefer blue chip stocks for investment.
Shares in Reliance Infra fell 7.2%, while those in another group company Reliance Power fell 4.9%.
Lenders extended losses.
Top lender State Bank of India closed 3.7% down at 1,887.85 rupees, while No. 2 ICICI Bank fell 1.6% to 820.25 rupees. Banks have been hit by worries that rising interest rates would curb their credit growth.
Construction firm Jaiprakash Associates fell 7.7% to be the biggest loser on the benchmark index, while top listed real estate firm DLF fell 5.9%. The sector has been hit by poor earnings growth and high debt.
World stocks as measured by MSCI was little changed, while the emerging equities added 0.12%.
Leading iron ore miners fell after reports said India’s top court extended a ban on mining to two more districts in the southern state of Karnataka.
Shares in Sesa Goa fell 6.4%, JSW Steel lost 5.8%, while state-run NMDC closed 4.1% lower.
Tata Power fell 3.1% to Rs 1,013.15. Morgan Stanley has downgraded the stock to “underweight” from “equal-weight” and has cut its target price to Rs 900 from Rs 1,221.