Mumbai: Markets fell as much as 1.6% on Thursday, in tandem with weak Asian peers, dragged down by worries over the health of the global economy and on expectations domestic monetary policy will be tightened further despite risks to growth.
India’s top private sector lender ICICI Bank fell over 4% to lead the losses, while technology major Infosys Ltd fell over 3%.
At 12.21pm, the 30-share BSE index was down 1.6% at 16,567.33 points, with 24 components declining. The index had risen as much as 0.5% in early trade.
Major Asian indexes -- Taiwan’s tech-heavy index , Japan’s Nikkei stock average and S&P stock futures -- continued to trade down 1-2%, tracking a fall in US tech shares on Wednesday and global economic worries.
“Today, the mid cap stocks have stabilised but the large caps ones are down... Especially the banks and real estate companies. This is primarily due to the RBI (Reserve Bank of India) not giving much comfort to the sectors,” S.P. Tulsian, an independent analyst told Reuters over the telephone.
“There is a nervousness and this trend will continue till the (monthly derivative contracts) expiry happens.”
Last week, Citi cut its year-end target for India’s benchmark index by nearly 10% to 19,700 from 21,500, citing weak market environment, heightened uncertainty and lower earnings.
Cautious foreign funds have turned net sellers of local equities this month -- offloading $1.4 billion of shares -- after buying a net $1.7 billion worth of shares in July.
“The market is down on global cues and a fear that the RBI might raise the rates, which would affect the industry growth,” R.K. Gupta, managing director, Taurus Mutual Fund, said
Shares would continue to under perform for another week or so unless there is some unexpected change in the overcall scenario, he said.
“Sectors like information technology, banks and real estate have taken the highest hit and they would bounce back over next four-five months once the markets improve,” he said suggesting the better sectors for investment.
The country’s largest lender State Bank of India’s shares fell over 2.7% to 2,110 rupees, while ICICI Bank fell 4.82% to 865.90 rupees.
The banking index has fallen over 9% in 2011 as investors fretted over growth prospects after the RBI raised interest rates 11 times since March 2010.
Infosys Technologies fell 3.83% to 2,355 rupees on Thursday, while India’s information technology index has lost 27.2% so far this year.
US tech shares fell on Wednesday after Dell’s disappointing sales outlook fanned worries weak economic growth will hurt earnings in the third quarter.
India’s showcase $76 billion software and services sector, which has already been reeling under competitive pressure and sluggish demand, counts the United States and Europe as its two biggest markets.
Shares in Idea Cellular rose over 1% after Malaysia’s Axiata bought 0.9% more in India’s fourth-biggest mobile carrier, raising its holding to about 20%.
On Wednesday, the world’s largest coal miner Coal India toppled energy major Reliance Industries to become the country’s most valuable firm at more than $55 billion.
The 50-share NSE index was down 1.58% at 4,976.8 points.
In the broader market, 961 declines outnumbered advances on volume of 344 million shares, while the total volume was 193.35 million.
Shares in Educomp Solutions fell over 12% after reports that income tax officials conducted searches at its premises in New Delhi and Gurgaon were, two traders said.
Shares in Jet Airways rose over 2.5% after a top official said it aimed to increase domestic low-fare capacity to 80-85% of total fleet from 72% currently.
Shares in Sadbhav Engineering rose over 2.5% after it won an order worth Rs 202 crore.