Mumbai: Indian shares fell 0.3% on Tuesday to their lowest close in a month as shaky global markets and concerns about the US economy cast a shadow on the outlook for risk appetite.
The 30-share index, however, stretched a monthly winning streak to three, but analysts were uncertain if it could sustain the trend. The 50-share NSE index closed 0.2% lower at 5,402.40.
“The month ahead looks choppy. There are no domestic triggers in sight and all depends on global cues,” said Prakash Diwan, head of institutional business at Networth Stock Broking. Energy major Reliance Industries fell 3.1%, the most in three months, as investors gave a thumbs down to its surprise stake buy in hotel chain EIH which was seen as a diversion from its core strength.
Data showing the economy grew an annual 8.8% in the June quarter, the fastest clip in nearly three years, failed to excite investors as it was in line with expectations.
“Policymakers will be more interested in the potential impact of slower global growth in the months ahead rather than the fact that domestic growth was strong earlier this year,” said Brian Jackson, senior emerging markets strategist at Royal Bank of Canada in Hong Kong.
The BSE index fell 0.34%, or 60.99 points, to 17,971.12, its lowest close since 30 July.
The benchmark rose 0.6% in August, while its peers such as Brazil’s Bovespa and Russia’s RTS index are down 4.8% and 5.1% respectively and China’s Shanghai Composite index closed barely changed.
For the year to date, the BSE index is up 2.9%, thanks to foreign portfolio investment of $12.7 billion.
World stocks dropped on worries the US economy is sliding back into recession, prompting further flows into safe-haven assets.
MSCI’s All-Country World Index lost 0.7% by 3:57pm, and was headed towards its worst monthly performance in three months.
Reliance Industries, which has the heaviest weight on the main index, dropped 3.1% to Rs918.85, after it said late on Monday its subsidiary had acquired a 14.12% stake in hotel chain EIH Ltd for $217.5 million.
Credit Suisse said the move, along with a recent entry into telecoms, raise questions on whether Reliance would have been better off returning the cash, rather than making investment decisions outside its core operations.
EIH closed 7.1% lower, after rising as much as 20% earlier in the day.
“The valuation at which the deal happened and yesterday’s closing price was near its peak. Those were not sustainable and there were no further triggers that were expected,” Himani Singh, sector analyst at Elara Securities, referring to EIH.
Financials closed mixed as demand outlook for loans remained positive on robust economic growth even as interest rates were seen rising.
Top lender State Bank of India fell 1.3%, while rivals ICICI Bank and HDFC Bank firmed nearly 1% and 0.1% respectively.
“The stocks which ride on domestic consumption story should be preferred,” Diwan said, citing capital goods makers, large banks and auto parts producers.
More than two shares declined for every share that advanced in the broader marker on relatively lower volume of 345 million shares.
Mortgage lender Housing Development Finance Corp dropped 0.5% to Rs624.15, as Goldman Sachs downgraded the stock to “sell” from “neutral”.
Karur Vysya Bank rose 5.3% to Rs747.20, as the lender said its board would consider a bonus and rights share issue on 7 September.
Kalindee Rail Nirman climbed 1.6% to Rs159.25 after it received Rs180 crore contract from a Vedanta group firm for railway siding and linkage project.