Mumbai: Shares dropped more than 1% on Tuesday on lingering concerns the unrest in Egypt could spread to other parts of the Middle East and scare more investors away from emerging markets.
Concerns about rising world oil prices, which could add to domestic inflation pressures and possibly more monetary tightening, also hastened selling.
Shares in outsourcing firm Infosys Technologies and energy major Reliance Industries were among the major losers in the benchmark index, which posted its worst monthly fall in more than two years in January.
Realtor DLF fell as much as 1.5% to Rs 220.55 after it painted a cautious near-term outlook on rising borrowing costs. It also reported a marginal drop in quarterly earnings.
Reserve Bank of India last month raised interest rates for the seventh time since March to curb stubbornly high inflation.
By 11:30am, the benchmark index was trading down 1.1% at 18,133.74%, with all but six of its components falling. The index had risen 0.7% in early trade and then fell as much as 1.6%.
“The geopolitical situation is not as comforting as it was a month ago, and investors are worried that the Egypt situation may escalate or spill over to other countries,” said Gajendra Nagpal, chief executive at Unicon Financial Intermediaries.
“On the home front, inflation is not showing any signs of going away in a hurry. In the scenario it is very difficult to take a call on whether the market has bottomed out,” he said.
The main index is down about 12% so far this year, after having risen 17% last year, as worries about surging inflation in Asia’s third-largest economy led to withdrawals by overseas portfolio investors.
Foreign funds were net sellers of $1.19 billion worth of shares last month until Jan. 28. Last year, investments had reached a record $29.3 billion.
India’s manufacturing sector expanded at a slightly faster pace in January on the back of output and new order growth but inflationary pressures persisted, a business survey showed on Tuesday.
Inflation has been a concern for policymakers in most developing economies, including India, where rising food prices have driven up broader inflation and put more pressure on central banks to tighten policy.
Software exporters Infosys fell 1.3% to Rs 3,075 and Tata Consultancy Services was trading 1.1% lower at 1,144 rupees, as worries about outsourcing business momentum kept investors on the sidelines.
Index heavyweight Reliance Industries dropped 1% to Rs 910 on sell-off by foreign funds.
Maruti Suzuki fell 1.5% to Rs 1,233.60 after it posted a 14.7% rise in January car sales, the slowest pace of monthly growth since last March as rising rates and higher fuel prices crimp demand for automobiles in India.
Tata Motors, which is due to report its January sales later in the day, was trading 3.6% lower at Rs 1,106.40.
Auto sales in India grew a record 31% in 2010, driven by a burgeoning middle class, but hike in interest rates, and rising fuel and vehicles costs are expected to slow sales growth this year.
In the broader market, 1,350 losers were ahead of 1,139 gainers on relatively moderate volume of 107 million shares.
The Nifty or NSE-50 index was down 1% at 5,450.90 points.
TVS Motor Co, India’s No. 3 two-wheeler maker, rose as much as 2.7% to Rs 55.90 after the company said total sales for January rose nearly 30%.
National Aluminium Co was trading up 2.5% at Rs 404.15 after the company approved 1:1 bonus share issue and a two-for-one stock split.