Mumbai: Indian shares fell 2.7% on Friday to their lowest close in three months, as global selloff over Europe’s sovereign debt problems and US jobs worries raised fresh concerns over world recovery and dented sentiment.
Traders said foreign investors unwound their positions in futures and options, indicating there could be cash outflows and put further pressure on the spot market.
The main index dropped 3.5% on the week, its third straight weekly fall.
“What we are seeing is dollar-carry-trade unwinding by foreign investors,” said Neeraj Dewan, director, Quantum Securities. “They borrowed when the dollar was cheap and now that the dollar is recovering, they are unwinding.”
The US dollar has surged after investor anxiety about sovereign debt in Greece, Portugal and Spain sparked a sell-off in the euro and growth-linked currencies such as the Australian dollar.
Energy major Reliance Industries, outsourcers such as Infosys Technology and banking stocks - all favourites with foreign funds - were among the main losers.
Reliance fell 3.7% to Rs981.30, its lowest close in three months. Just before trading ended, CNBC TV18 business channel reported the company has submitted a $2 billion expression of interest for private Canadian firm Value Creation Inc, which holds oil sands assets.
The 30-share BSE Index ended down 2.68%, or 434.02 points, at 15,790.93, its lowest close since 3 November and the second biggest one-day%age fall since then. Only one component gained.
It’s a classic tug-of-war,” said Deven Choksey, chief executive of Mumbai brokerage KR Choksey Shares & Securities.
“On the one side liquidity is being withdrawn, but on the other side, you have domestic institutions waiting to get in because the companies all have strong fundamentals.”
But large share sales by companies were drawing money away from the market, he said.
Indian developer DB Realty Ltd raised $325 million this week from an initial public offer mainly subscribed by institutions.
State-run NTPC Ltd, India’s leading power producer, has also received full subscription for its $1.8 billion share sale that closes on Friday.
The stock closed 1.6% lower at Rs201.30, near the floor price of Rs201for investorsin the follow-on public offer.
Top lender State Bank of India and rival ICICI Bank led the losses in banking stocks. ICICI dropped 3.7% to Rs798.35, while larger SBI shed 2.7% to Rs1,896.65. The sector index lost 3.04%.
Among tech stocks, software bellwether Infosys fell 2.9% to Rs2,352.20, while larger rival Tata Consultancy gave away 2.2% to 726.05 rupees. Wipro slipped 2.1% to Rs640.90.
Ranbaxy Laboratories slid 5% to Rs404.85 after the Economic Times reported the US regulator asked the drugmaker to immediately assess whether its plants making drugs for the US market met standards. In the broader market, losers led advances in the ratio of 2.8 to 1 on moderate volume of 395 million shares.
The 50-share NSE index ended down 2.6% at 4,718.65 points, its lowest close since 4 November.