New Delhi: Indian shares fell for a third straight session on Tuesday, wiping out early gains as a lower than expected German gross domestic product (GDP) growth dragged European stocks, renewing fears of a global economic slowdown.
A marginal easing of India’s headline inflation for July failed to soothe nerves in a fragile market, as the still high headline number and persistent price pressures in manufactured goods raised the odds that policy will have to stay tight in the economy despite the rising risks to growth.
The main stock index ended down 0.65%, or 108.69 points at 16,730.94, with 22 components closing in the red, after having risen as much as 1.2% in early trade.
“I think the inflation numbers that came out were slightly higher; they are not coming down. Secondly, there is weakness in the European markets,” said Vikas Khemani, head of wholesale capital markets at Edelweiss Securities.
European stocks fell on Tuesday, halting a rebound that started last week, as investors fretted about tepid German GDP growth ahead of talks between German and French leaders on the euro zone debt crisis.
At 10.15am GMT, the FTSEurofirst 300 index of top European shares was down 1.11% at 958.47 points.
Khemani said his outlook for the Indian market is “sideways-to-weak”, as he does not see any positive trigger in the near term.
Energy major Reliance Industries Ltd, India’s top listed firm and which has the biggest weightage on the benchmark index, remained mostly steady, and closed 0.23% lower.
Foreign funds have turned net sellers of local equities this month—offloading $1.2 billion of shares—after buying a net $1.7 billion worth of shares in July.
State Bank of India ended 0.41% up after the country’s top lender said it expects a stronger second quarter after provisions for sour loans, coupled with treasury losses, led to a second straight drop in quarterly profit.
The BSE Banking index, however, lost 1.2% with Kotak Mahindra Bank Ltd and HDFC Bank Ltd shedding 3.49% and 2.5%, respectively.
Reliance Communications Ltd lost 7.59%, after it reported a sharper than expected 37% fall in quarterly profit, its eighth straight quarter of profit drop, as the country’s No. 2 mobile carrier by subscribers struggles with high debt.
Shares in Coal India Ltd, the world’s largest coal miner, rose 0.71% after the firm on Friday said its fiscal first quarter profit surged 64%, beating Street estimates, as stronger sales and a price increase effected in February boosted margins. Indian markets were closed on Monday for a national holiday.
The MSCI’s measure of Asian markets other than Japan closed up 0.3%, while Japan’s Nikkei rose 0.23% from Monday’s close.
The 50-share NSE index fell 0.73% to 5,035.80 points.
In the broader market, more than three stocks declined for every single advance on an overall volume of 621.8 million shares.