New Delhi: Markets shed more than 1% on Thursday with no respite seen in the central bank’s tightening trend in the near term as fighting inflation remained the priority.
Subdued Asian markets and US debt woes also weighed on investors. Energy major Reliance Industries and software services bellwether Infosys , which together account for about a fifth of the weightage in the main index, led the losses.
“There could be earnings downgrades due to rising rates,” said Ambareesh Baliga, chief operating officer at Way2wealth Securities. “There are lot of international headwinds too.”
Finance minister Pranab Mukherjee warned on Wednesday of more interest rate increases, a day after the country’s central bank shocked markets by lifting rates by a hefty 50 basis points.
The Reserve Bank of India has raised rates 11 times since March 2010 to fight nearly double-digit inflation. Rising borrowing costs have a bearing on corporate profit margins and could slow the pace of economic expansion.
At 10:46am, the main 30-share BSE index was down 1.1% at 18,232.77, with all but four of its components declining.
The 50-share NSE index fell 1.15% to 5,483.10. There were more than four losers for every gainer on the National Stock Exchange, with total volume of about 247 million shares.
Foreign funds have invested a net of $2.8 billion in Indian equities since June 23, but data over the last week suggests wavering interest.
Reliance Industries fell 2.1% to Rs 843. The company earlier this week reported record quarterly profit but slowing gas production has clouded its outlook.
Infosys, the country’s second-biggest software exporter, was down about 2% at Rs 2,740.20, while bigger rival Tata Consultancy fell 1.4% to Rs 1,131.05 on worries about their main US market.
State-run oil explorer Oil and Natural Gas Corp was little changed at Rs 276.30 ahead of its fiscal first-quarter results. The company is expected to report a 16.4% rise in June quarter net profit.
Cement makers ACC Ltd and Ambuja Cements , both controlled by Swiss cement producer Holcim , were down 0.6% and 1.2% respectively ahead of their quarterly results.
Asian stocks fell ahead of a long list of corporate results on Thursday that may shed light on the year’s earnings outlook, though the region continued to outperform Wall Street in July.
The MSCI’s measure of Asian markets other than Japan was down 1.1%, while Japan’s Nikkei fell 1.6%.
Wall Street suffered its worst day in eight weeks on Wednesday, hit by weak earnings, lackluster economic data and no movement in Washington talks as the deadline for a U.S. default looms.
Punjab National Bank, India’s No. 2 state-run lender, fell 3.2% to Rs 1,090.45 ahead of its quarterly results. The banking sector index was down 1.1% in line with the broader market.
SKS Microfinance dropped 6.3% to Rs 449.70, extending Wednesday’s more than 8% loss. SKS, India’s largest and only listed microfinance company, on Tuesday reported a net loss for the June quarter.