Mumbai: Indian shares fell 1.32% on Friday to their lowest close in more than two weeks, although the market ended well off its lows as initial fears over the impact of Dubai’s debt problems gave way to bargain hunting.
Assurances by banks and builders that they had no material exposures to Dubai calmed rattled investors and eased concerns about an imminent outflow of foreign capital, helping the market pare most of a drop of 3.8%.
Leading private banks ICICI Bank, diversified Jaiprakash Associates and developers DLF, Unitech and Sobha Developers were among those to end comfortably above their intra-day lows.
“I would not read too much into Dubai. Is there a direct impact on our market? The answer is ‘No´,” said Anand Shah, head of equities at Canara Robecco Mutual Fund.
“Fundamentally, we are not impacted. But if the risk appetite comes off, the liquidity flow could reduce.”
The 30-share BSE index fell 222.92 points to 16,632.01, its lowest close since 10 November, with 25 components losing ground. The 50-share Nifty closed 1.27% lower at 4,941.75 points, its lowest close since 10 November.
The benchmark index has rallied more than 70% in 2009, on the back of foreign fund inflows of more than $15 billion.
ICICI Bank closed down 1.7% 851.25 rupees, recovering from a fall of 6.4%, and top lender State Bank of India ended down 0.5% after falling as much as 4.8%.
Leading realty firm DLF recovered from a fall of 8% to end down 1%.
Dubai said it wanted creditors of Dubai World and property group Nakheel to agree a debt standstill as it restructures Dubai World, the conglomerate that spearheaded the emirate’s breakneck growth.
That sparked investor fears that debt defaults could hit other parts of the globe, rattling world markets
“Valuations were at a point where they were looking for reasons to correct,” said Nitin Rakesh, CEO of Motilal Oswal’s asset management business.
“Not just markets here, but markets globally were at year highs. This has been one of the strongest years in recent history globally,” he said.
Engineering and construction firm Larsen & Toubro said its exposure to Dubai was $20 million to $25 million, while state-run lender Bank of Baroda said it has exposure of 7-8% of its loan book in the United Arab Emirates.
Larsen & Toubro fell as much as 6.2%, but trimmed some of the losses and closed 2.7% lower at Rs1,586.50.Bank of Baroda declined 4.6% to Rs521.40.
“Based on available data, Bank of Baroda seems to have the biggest exposure to Dubai -- this could cause the stock to come under some pressure in the near term,” Morgan Stanley said in a note on India financial services.
In the broader market, losers outnumbered gainers in the ratio of 2.7:1, on relatively moderate volume of 382 million shares.