Mumbai: Markets shed 0.7% on Tuesday in tandem with weak Asian markets, and investors were awaiting economic growth data due around 11 a.m. for direction.
Energy giant Reliance Industries led the decline after its surprise stake buy in hotel chain EIH was seen as a diversion from its core strengths.
A Reuters poll showed India’s economy probably grew an annual 8.7% in April-June, its strongest pace since the December quarter of 2007.
By 10:25 a.m., the 30-share BSE index was down 0.73% at 17,900.93, with 23 of its components declining.
“Global cues are negative today, which pulled our market down. Also, people are on the sidelines before the GDP data,” said Anish Marfatia, head of sales trading at Avendus Securities. The benchmark index is up 0.2% for the month, and has gained 2.5% in 2010.
According to data from Nomura, foreigners preferred Indian equities the most from the Asia ex-Japan pack and invested $854 million in the week to 27 August.
Reliance Industries, which has the heaviest weight on the main index, was down 2.1% at 928.25 rupees, after it said late on Monday its subsidiary had acquired a 14.12% stake in hotel chain EIH Ltd for $217.5 million.
EIH was trading 2% higher, after rising as much as 20%.
“Our positive outlook on RIL is underpinned by expectations of improving visibility on continued growth, as the company defines the use of its large cash,” Credit Suisse said in a note.
“Unfortunately, investments such as the broadband venture and now this don’t help the thesis,” it said.
Credit Suisse said such moves raise questions on whether Reliance would have been better off returning the cash, rather than making investment decisions outside its core operations.
Financials edged lower on concerns tighter monetary stance would prevail for a while.
Top lender State Bank of India shed 1.2%, while rivals ICICI Bank and HDFC Bank <HDBK.BO> dropped 0.5% each.
In the broader market, losers led gainers in a ratio of 2.7:1 on volume of 97 million shares.
The 50-share NSE index was down 0.7% at 5,376.45.
Asian stocks were weak on worries about the flagging U.S. economy. The MSCI’s measure of Asian markets other than Japan was down 1.2% while Japan’s Nikkei dropped 3%.