Mumbai: Weak world equities and a fall in financials pack on rate hike worries dragged Indian shares 1.1% lower on Wednesday, their second straight decline.
Trading turned choppy a day ahead of the expiry of monthly derivatives contracts on the National Stock Exchange, which also weighed on the market sentiment.
State-run utility NTPC fell 3.1%, its biggest single-day drop in five months, as it posted nearly flat September-quarter net profit.
The 30-share BSE index closed 1.07% or 216.02 points lower at 20,005.37, with 22 of its components closing in the red. The 50-share NSE index shed 1.1% to 6,012.65 points.
“The (derivatives) expiry event tomorrow is weighing on the market. The volatility is very high in recent times and indicates trade will stay choppy,” said Prakash Diwan, head of institutional business at Networth Stock Broking.
“Weak world markets with doubts over the Fed’s actions at the meet next week is also keeping the market subdued,” he said referring to the US Federal Reserve’s meeting.
Most currency dealers expect the Fed to opt for more quantitative easing -- essentially printing money to buy assets and pull market rates lower -- but some believe the dollar already reflects those expectations and the question of how much easing, and how fast, has kept them edgy.
In recent times, emerging economies such as India, with robust GDP growth, have been attractive bets for foreign investors amid sputtering developed economies.
TrimTabs Investment Research said on Tuesday that India exchange-traded funds have sucked in 8.4% of assets in the past four weeks.
The U.S.-based research firm said foreign investors have remained net buyers of Indian equities for 38 straight trading days, the longest streak in five years.
Net foreign portfolio investment in Indian equities has added to $24.6 billion, driving the benchmark index 14.5% higher so far this year.
Tech Mahindra dropped as much as 2.7% to Rs764.10 after the outsourcer said late on Tuesday second-quarter profit fell more than 10% as it booked a charge related to its shareholding in Mahindra Satyam
“Barring a faster-than-expected turn around at Satyam, we would continue to find it difficult to make a positive investment case for Tech Mahindra and retain hold,” a BNP Paribas note said.
Leading private sector lenders ICICI Bank and HDFC Bank declined 2.2% and 1.9% respectively.
Mortgage lender Housing Development Finance Corp dropped 2.6%. Top lender State Bank of India bucked the trend and rose 0.4%.
On Tuesday, Reserve Bank of India warned of persistent inflationary pressures on the economy from rising food prices, adding to expectations that the central bank will raise interest rates in November.
The Reserve Bank of India is widely expected to raise interest rates by at least 25 basis points on 2 November, at its policy review.
Energy giant Reliance Industries gave up early gains and closed 0.4% lower, amid a lack of near-term triggers.
Declining shares outpaced advancing ones in the ratio of 1.4:1 in the broader market, on a strong volume of 510 million shares.
By 1024 GMT, the broader indexes - MSCI world equity index and MSCI’s emerging market stock benchmark dropped 0.4% and 1.1% respectively.
Glenmark Pharmaceuticals rose 3.3% to Rs324.15 as the drugmaker’s consolidated quarterly net profit rose 38.3%, beating street estimates, on robust growth in generics and Active Pharmaceutical Ingredients.
Developer Prestige Estates Projects debuted at Rs190, a premium of 3.8% to its issue price of Rs183. It closed at Rs192.55.
HCL Infosystems declined 3.2% at Rs114.80, as the personal computers and laptop maker said its July-September net profit declined 19.5%.
Mangalore Refinery & Petrochemicals rose 1.8% to 83.95 rupees, after its quarterly profit rose 57%.
Outsourcer Mahindra Satyam was down 0.4% at Rs80.60, after UBS said on Tuesday it had initiated coverage of the company with a “sell” rating as it expected client and employee attrition would continue hurting the company this fiscal year.
Raymond rose 1.2% to Rs442.35, after the textiles firm said on Tuesday its September-quarter net profit rose more than five times from a year ago.