Mumbai: Indian shares fell 1% on Monday to their worst close in more than three weeks on fears a nascent economic revival would be scuppered by poor rains, which are key to the country’s domestic-demand-led economy.
Bharti Airtel fell as much as 4.8% on heavy volume to its lowest in more than three months on worries the top telecoms firm may have to sweeten its bid for South Africa’s MTN.
Automakers such as Mahindra & Mahindra and Maruti Suzuki, and consumer-goods firms Hindustan Unilever and ITC were among the major losers as weak monsoon rains are expected to hit crucial rural demand.
India’s prime minister asked state governments on Saturday to take steps to deal with poor monsoon rains that have hit sowing of important crops, leading to a sharp rise in prices of food items like sugar.
Rains in India, where only 40% farmland is irrigated, were 28% deficient at the weekend, raising fears the June-September season may turn out to be as bad as 2004 when summer crop output fell 12% after a drought.
“A weak monsoon usually doesn’t have an immediate impact; we’ll see its effects only in a few quarters,” Sonam Udasi, vice president of research at BRICS Securities, said.
“But with regards to sentiment, it will hit the market immediately.”
Energy giant Reliance Industries, India’s top listed firm with the most weight in the main index, retreated 0.5% to Rs1,986.35.
The 30-share BSE index ended down 0.99% or 150.47 points, at 15,009.77, its third consecutive fall. Twenty-four stocks declined, but trading was choppy, with the benchmark gaining as much as 1.7% in early trade. The 50-share NSE index fell 1% to 4,437.65.
Better-than-expected US jobs data boosted hopes for a recovery in the world’s largest economy, lifting IT-services firms.
No. 2 outsourcer Infosys Technologies gained 2.2% to Rs2,086.80, while bigger rival Tata Consultancy climbed 6% to Rs538.85.
“It’s only because of the weak monsoon that the market is behaving like this. Other than that, the market looks good,” S. Ranganathan, head of research at LKP Shares, said.
“Sectors that may be hurt by weak rains like consumer goods and autos are victims of profit-taking.”
Top carmaker Maruti Suzuki slid 3.1% to Rs1,251.40, while leading vehicle maker Tata Motors eased 3.3% to Rs400.95.
No. 1 utility vehicle maker Mahindra & Mahindra dropped 9.1% - its biggest one-day fall in more than nine months - to Rs758.10. India’s auto index ended down 4.5%.
Automobile firms had reported better-than-expected profits in April-June, helped by lower raw material costs, while their July sales rose on new launches and easier finance, driving the auto index up more than a third between 13 July and last Wednesday.
Hindustan Unilever shed 3.5% to Rs260.45, while ITC fell 2.7% to Rs223.95.
Bharti Airtel slid 2.5% to Rs374.15, its lowest close in three months. About 3.7 million shares were traded, nearly four times the daily average volume over the past 30 days.
Bharti and MTN, which have been working on a complex $23 billion cash-and-share swap for over two months, said a week ago that exclusive talks would be extended until late August and that the terms of the potential deal may be adjusted.
The two companies hope the deal will lead to a full merger, creating the world’s third biggest cell phone group, with more than 200 million customers and combined revenue of $20 billion.
On Friday, a source familiar with the negotiations told Reuters that Bharti may increase its offer by between 5 and 10%.
“We don’t understand the logic for this deal at all. Why does Bharti want to change from a company with a net cash position of $1 billion to a debt-ridden firm?” BRICS Securities’ Udasi said.
“We do not buy the argument the deal is going to add value. There is nothing in the deal to highlight as adding strategic value.”
In the broader market, losers led gainers by 2 to 1 on below-average volume of 387.4 million shares.
Asian shares were higher on Monday, with Japan’s Nikkei rising 1.1%, while MSCI’s measure of other Asian markets was up 0.7%.
At 4:00pm, the pan-European FTSEurofirst 300 index of top shares was down 0.7%.