Mumbai: The BSE Sensex dropped 4.1% on Monday in its biggest fall since the budget in early July, as worries about the pace of global economic recovery sparked a broad sell-of in equity markets across the world.
Concerns that poor monsoon rains - crucial for India’s domestic-demand-led economy - will dent growth added to the gloom.
Energy giant Reliance Industries shed 4.7% to Rs1,939.60, while state-run explorer Oil and Natural Gas Corp lost 4.6% to Rs1,164.25 as oil prices fell to a two-week low below $66 a barrel.
Non-ferrous metals producer Sterlite Industries fell 6.7% to Rs618.05 and leading aluminium producer Hindalco Industries slid 7.4% to Rs100.25 as prices of industrial metals declined.
Other major losers included top listed realty firm DLF, which slumped 7.8% to Rs364.40, and private-sector lender ICICI Bank that dropped 5.3% to Rs704.85.
”We expect a 10 to 15% pullback in equities led by drought-led growth cuts,” Bank of America Merrill Lynch analyst Jyotivardhan Jaipuria said in a note to clients.
The 30-share BSE index fell 4.07%, or 626.71 points, to 14,784.92, its lowest close since 17 July. The 50-share NSE index fell 4.2% to 4,387.90.
It was the biggest one-day percentage fall since a 5.8% drop on 6 July, when the government announced a budget that disappointed investors expecting bold economic and financial reforms.
“We still expect the economy to bottom out end-2009,” Jaipuria said. ”Yet, the ride will be bumpier than we thought. Let’s face it: India faces severe drought.”
All stocks in the main index declined, with the benchmark sliding as much as 4.4% during trade.
In the broader market, losers led gainers by almost 3 to 1 on relatively moderate volume of 376.9 million shares.
“The feeling that the worst is not over for the world is looming large in the minds of investors,” Arun Kejriwal, strategist at research firm KRIS, said.
“If I had money to invest, looking at the state the world markets and India is, I would wait for sometime. There is no hope for a major rally in the next two to three months.”
Returning to a high growth rate is the greatest challenge facing India, with a weak monsoon making the task harder, but the economy may improve by year-end, Prime Minister Manmohan Singh said in his Independence Day speech on Saturday.
The economy is likely to grow by 6.5-7% in the year to March 2010, a top policy adviser said last week, matching the 6.7% growth in 2008/09, and well below the growth rates of 9% or more in the previous three years.
Traders said the market would be choppy till clarity emerged on the government’s response to the weak monsoon.
Asian shares were lower, with Japan’s Nikkei falling 3.1%, while MSCI’s measure of other Asian markets was down 3.8%.