Mumbai: Indian shares fell 0.7% on Friday as poor rains dampened hopes for a rapid rebound in Asia’s third-largest economy, but a strong surge the previous day helped lift the main index 1.7% for the week.
The top economic advisor to the prime minister said drought would have an impact on growth in 2009/10 and he expected the economy to expand 6 to 6.5%, lower than the 7% forecast in the annual budget in early July.
“Exports are not doing well, industrial production is showing signs of picking up, but the drought will have an impact on growth,” C Rangarajan told reporters in the southern city of Hyderabad.
With the US economy showing signs of levelling out and Germany and France emerging out of recession quicker than expected, there was underlying support for the stock market.
However, traders expected the market to be choppy till clarity emerged on the government’s response to the weak monsoon. “The market is highly confused and totally indecisive,” said Daljeet Kohli, research head at Emkay Stock Broking. “On the downside there is drought, but its impact will be long term and it will be felt two quarters from now.”
The 30-share BSE index fell 0.69% or 106.86 points, to 15,411.63, with all but 5 stocks falling, a day after rallying 3.3% to its best close in more than week. The 50-share NSE index was fell 0.5% to 4,580.05 points.
No. 2 lender ICICI Bank led the losses on concerns the weak monsoon would hurt an economic revival and delay its plans to boost loan growth. The stock fell 1.7% to Rs744.15.
State-owned Oil and Natural Gas Corp and energy giant Reliance Industries rose as oil rose towards $71 a barrel.
“The positive bias is coming from the liquidity. Public offerings are getting adequately oversubscribed. Plus in between we have sporadic positive news from global markets which briefly boosts sentiments,” Kohli said.
Adani Power and state-run NHPC Ltd have raised a combined $1.9 billion since late July with the IPOs subscribed more than 20 times each.
Outsourcer Infosys Technologies, which gets most of its revenue from the United States, fell 1.2% to Rs2,039.85 after US retail sales for July came in much weaker than forecast on Thursday.
The monsoon in India was 56% below normal over the past week, government data showed on Thursday, disappointing farmers for a third consecutive week while consumers felt the pinch of rapidly rising food prices.
The wholesale price index fell in the year to 1 August for the ninth week in a row, but there were signs prices could rise faster in the coming months due to the weak monsoon and growing manufacturing demand.
Despite concerns about rich valuations after the benchmark leapt 92% from a 2009 low in early March, a rush of liquidity pouring into equity markets could support stocks in the short term as investors look to buy on dips, traders said.
In the broader market, 1,427 gainers led 1,252 losers on more than average volume of 442 million shares.