Mumbai: Shares fell 0.9% on Thursday after most large banks reversed the previous day’s rise in anticipation of an interest rate increase next week, and as doubts about Europe’s ability to solve its debt crisis hit global equity markets .
Lender ICICI Bank ended 2.9% down, while Housing Development Finance Corp fell 4.3% and HDFC Bank ended 0.5% lower . The banking sector index had risen 2.7% on Wednesday.
Rising rates due to persistently high inflation have increased worries over asset quality and margins at banks. The Reserve Bank of India, which has raised rates a dozen times since mid-March 2010, is expected to hike them again next week when it meets to review policy.
Food price index rose 10.60% and the fuel price index climbed 15.17% in the year to Oct. 8, government data on Thursday showed.
The main 30-share index ended 0.87% lower at 16,936.89 points, with 22 of its components declining.
The benchmark has risen 3.8% since the end of September, but is down 17% this year as high borrowing costs squeezed corporate profits and a series of government scandals paralysed government policy making.
“The instability, globally, is affecting sentiment in a big way. That is why one day when global markets are up we are going up and the next day when they are down we follow. It is very difficult to say where they are headed even in the short-term,” said Neeraj Dewan, director with Quantum Securities.
“To add to worries there is a rate hike expected and that is also having a go at market sentiment,” he added.
Shares of India’s No.2 motorcycle maker Bajaj Auto fell as much 5% after its September quarter profit lagged estimates.
Interest rate sensitive auto stocks also fell with Tata Motors ending 2% down, Mahindra & Mahindra falling 1.1% and Hero MotoCorp ending 1.8% down.
Analysts said investors were also wary as monthly derivatives contracts will expire two days early on Oct. 25 due to holidays.
Shares of Biocon , India’s top biotechnology company, ended 0.3% lower after it reported a 4% drop in quarterly profit due to higher energy costs and rise in wages.
Shares of oil explorer Cairn India ended down 2.1% at 293.55 rupees ahead of its earnings announcement. The company saw its quarterly net profit fell over 50% to 7.63 billion rupees.
Reliance Industries , India’s largest listed firm also fell 0.5%. The stock has lost about 20% since the beginning of the year as its growth outlook has been marred by falling gas output from its huge gas fields off India’s east coast.
The 50-share NSE index ended down 0.9% at 5,091.9 points.
In the broader market, there were 1.8 losers for every gainer on total volume of 495.8 million shares.
The MSCI’s broadest index of Asia Pacific shares outside Japan fell 2.28%, while Japan’s Nikkei was 1.03% lower.
World stocks as measured by MSCI fell 0.53%, while emerging equities were down 1.93%.
SREI Infrastructure Finance ended 5.6% down after it posted a 69% drop in quarterly net profit.
Bajaj Finserv Ltd climbed 2.6% after the company reported a net profit of 1.58 billion for September quarter late on Wednesday, more than double the year-ago figure.
Moser Baer India rose 7.6% after media reports the company has resolved issues of compensation with a section of its associates at its Noida plant.