Mumbai: Indian shares gave up morning gains and eased 0.1% on Thursday after lower European markets dented sentiment and sparked uncertainty about foreign fund inflows.
Investors were worried as food inflation in Asia’s third-largest economy accelerated in mid-June, maintaining pressure on the central bank to tighten monetary policy at a faster pace.
The Federal Reserve’s muted outlook for the US economy added to the pessimism and kept investors edgy, traders said.
The Fed acknowledged a faltering pace of US economic recovery on Wednesday as it renewed its vow to hold benchmark interest rates exceptionally low for an extended period.
The 30-share BSE index closed down 0.14%, or 25.70 points, at 17,730.24, with 18 of its components losing ground, after rising as much as 0.5% in the morning.
Trade was volatile as monthly derivative contracts expired on the National Stock Exchange.
Foreign funds have been net buyers of $1.7 billion worth of shares so far this month, helping the BSE index rise 4.6%. In May, they had pulled out $2 billion senting the benchmark down 3.5%.
“It is not yet an established trend that risk appetite has returned. If things go wrong internationally, we are bound to be impacted,” said Jigar Shah, vice-president of equity sales at brokerage Motilal Oswal.
Reliance Industries, which has the heaviest weight in the main index, dropped 0.7% to Rs1,051.30, with some investors not convinced about its drive to boost presence in the US shale gas sector.
The energy major struck a $1.36 billion deal for a 45% stake in Pioneer Natural Resources’ Eagle Ford shale acreage in south Texas.
Research firm Sanford C. Bernstein said the petrochemicals-to-refining giant seems to be looking at anything that can drive growth such as broadband, US unconventional gas, coal fired power and nuclear power.
“While Reliance has a strong track record of delivering transformational projects outside of their core area of expertise, we question the sustainability of this business model,” it said in a note.
Software stocks nudged lower with the sector index easing 0.1% after rising 0.7% on Wednesday.
Outsourcers Tata Consultancy Services and Wipro shed 1.5% and 0.8% respectively. Infosys, the top sector pick by many analysts, climbed 0.7%.
In the broader market, gainers outnumbered losers in the ratio of 1.2:1 on relatively better volume of 428 million shares.
The 50-share NSE index shed 0.1% to 5,320.60 points.
Europe’s FTSEurofirst 300 was down 0.7% by 1022 GMT while MSCI’s measure of Asian shares other than Japan shed 0.3%.
Kotak Mahindra Bank shed 2.7% to Rs762.15 as Dutch financial services group ING sold its 3.1% holding in the bank.
Edelweiss Capital climbed 2% to Rs525.20 after the company said its board approved a one-for-one bonus and five-for-one stock split.
IT services firm HCL Technologies dropped 3.9% to Rs358.85, after 16.9 million shares or 2.5% of equity changed hands through a series of block deals on Bombay Stock Exchange at an average price of 357.83 per share.