Mumbai: Shares dropped 0.2% in choppy trade on Tuesday, led by losses in financials such as ICICI Bank, amid global economic concerns as Europe struggled to contain its debt crisis.
Mixed Asian markets on fears of an imminent Chinese interest rate rise also dampened investor sentiment.
Shares in ICICI Bank, the No. 2 lender, fell as much as 3.9% to 1,105.50 rupees, on concerns that rising lending rates in the banking sector would crimp demand for loans in Asia’s third-largest economy, traders said. ICICI had lost 2.7% on Monday after it raised its benchmark lending rate by 50 basis points.
By 10:43am, the 30-share BSE index was trading 0.21% lower at 19,938.82, with 18 of its components declining. The index fell as much as 0.5% in early trade after rising 0.1% in opening deals. The broader 50-share NSE index was down 0.11% at 5,985.70.
“The Europe situation is mainly weighing on the sentiment,” said Neeraj Dewan, director at Quantum Securities. “The market trend in the near term will be determined by the corporate earnings, which are expected to be good for most sectors.”
Foreign funds have invested more than $29 billion in Indian equities so far this year, driving the benchmark BSE index about 14% higher.
Shares in top lender State Bank of India were down 2% at Rs 2,892 on fears that its net interest margins, a key gauge of profitability, may come under pressure after it hiked deposit rates by up to 150 basis points.
Macquarie said in a report that the “clear asymmetric” rate increases the banks were witnessing are bound to exert pressure on margins, particularly for state-run banks.
Shares in Tata Steel were up 1.3% at Rs 643 amid speculation over its future course of action after Rio Tinto made a $3.5 billion bid approach for Africa-focused Riversdale Mining.
Tata Steel, the world’s seventh-largest steelmaker by output, is the biggest shareholder in Riversdale.
In the broader market, losers were 2.2 times the number of gainers on volume of 110 million shares.
Elsewhere in Asia, Japan’s benchmark Nikkei average was down 0.2% at 10:30am. while the MSCI index of Asia-Pacific stocks outside Japan was trading up 0.5%.
China’s central bank may raise rates again this weekend as it tries to contain inflationary pressures, official newspaper the China Securities Journal reported on Tuesday.
Subex Ltd rose as much as 2.5% after the software services provider said it had won a contract for deploying a revenue operations centre for fraud management at Africa-focused Atlantique Telecom.
Hindustan Construction was up 1.8% at Rs 45.70 after it signed pacts with Vinci Construction, a unit of France’s Vinci, to jointly work on power, water, transportation and infrastructure projects.