Mumbai: Shares dropped 1.8% early on Friday as worries over slowing domestic growth hurt investor sentiment ahead of weaker economic data expected next week, while resolution to Europe’s debt crisis remains distant.
India’s industrial output likely shrank 0.5% in October from the same month a year ago, its first decline in over two years, hurt by a slowdown in export growth, a Reuters poll showed. The data is due on Monday.
By 11:30am, the 30-share BSE index was down 1.4% at 16,257.4, with all but two of its components in the red. The benchmark had fallen as much as 2% at one stage.
“Indian stocks are like a cycle stand,” said Jagannadham Thunuguntla, head of research at SMC Investments and Advisors. “If one falls, others follow suit.”
Energy major Reliance Industries, which has the heaviest weight in the main index, fell more than 2% after Nomura downgraded the stock to ‘neutral´ from ‘buy´, citing worsening exploration and production possibilities and declining refining margins.
Private sector lenders ICICI Bank and HDFC Bank fell more than 1.5% as slackening growth and a vulnerable rupee, which had hit a record low last month, drove investors away from stocks.
Brokerage Macquarie said it would continue to be bearish on the banking sector because of deteriorating asset quality and a possible tightening of margins due to an increase in savings rate.
The Reserve Bank of India is widely expected to pause at its meeting next Friday after raising rates 13 times since early 2010 to fight stubborn inflation.
The rupee, which is the worst performing Asian currency this year, fell as much as 1% in early trade.
Shares in export-focused software services company Infosys shed nearly 1%, while smaller rival Wipro was down 0.6%.
The 50-share NSE index fell 1.37% to 4,876.2. In the broader market, there were 2.7 losers for each gainer on a total volume of 223.6 million shares.
The MSCI’s broadest index of Asia Pacific shares outside Japan was trading down 2.5% on growing doubts that European leaders can forge a credible borrowing scheme to tackle the euro zone’s debt crisis at a summit in Brussels.
Kingfisher Airlines fell 4.8% after a tax official said the authorities had frozen 11 bank accounts of the carrier for failure to pay service tax dues.
Hindustan Petroleum Corp rose nearly 1% after its chairman said the oil marketing firm was in talks to buy crude oil from Syria.
Geojit BNP Financial Services rose 6.8% after French lender BNP Paribas agreed to pay 405 million rupees to buy out its Indian institutional broking business.
Reliance Capital rose as much as 1.6% after the Mint newspaper reported the company was in talks with at least three international firms to sell a 26% stake in its general insurance arm. A company spokesman declined to comment on the report.