Mumbai: Shares shed 0.9% in thin trade on Wednesday, a day before monthly derivatives contracts expiry, dragged by a sell-off in banks, on worries over worsening asset quality and slowing credit growth, and Reliance Industries.
“During the last one hour, we saw some buying and short covering coming in ahead of expiry, cutting the overall losses,” said Kishore P. Ostwal, chairman and managing director of CNI Research, referring to the derivatives contracts expiry on the National Stock Exchange on Thursday.
The main 30-share BSE index closed down 146.10 points at 15,727.85, with 18 of its components declining. The benchmark, which fell 0.6% on Tuesday, opened relatively flat and dipped as much as 1.3% on the day.
The BSE index has fallen more than 20% this year, making it one of the worst performing major index. Foreign funds have pulled out a net $470 million this year, compared with net inflows of more than $29 billion in 2010.
“Banking sector is under pressure because of concerns over asset quality, while the credit growth is lower,” said Naresh Kumar Garg, chief executive at Sahara Mutual Fund.
Mint’s Krishna Merchant gives you a lowdown on the winners and losers of Wednesday’s trade
The banking sector index closed down 1.98%, with top private lender ICICI Bank leading the losses, closing 3.9% lower. The country’s top lender State Bank of India shed 2.02%.
Indian banks’ non-performing assets, or bad loans, are expected to rise to about 2.6% of their total assets in the fiscal year ending March, from 2.3% a year ago, ratings agency Crisil said earlier this year.
Borrowers are finding it difficult to repay loans amid near double-digit inflation, high interest rate and a slowing economy.
India’s headline inflation has barely budged from above 9% for a year now despite 13 interest rate increases dealt by the Reserve Bank of India since March 2010.
Jindal Steel and Power was the top loser, shedding more than 7.1%, after a newspaper report said government was likely to cap costs of power supplied from projects with captive coal blocks and assured fuel supply from Coal India.
If such a move materializes, it would be negative for those companies with a combination of captive coal and selling power in the merchant market such as Jindal Steel and Power, Barclays said in a report on Wednesday.
A spokesman for Jindal Steel and Power did not immediately offer a comment.
Shares in oil marketing firms Indian Oil Corp., Bharat Petroleum Corp. and Hindustan Petroleum Corp. fell between 1.7% and 2.99%, after crude oil prices rose 5% in less than two weeks, on Iran’s threat to halt oil shipments through the Strait of Hormuz.
The 50-share NSE index fell 0.94% to 4,705.80. In the broader market, there were about two losers for every gainer on relatively lighter volume of about 439.25 million shares.
Stocks that moved
• Auto component makers Exide Industries, Apollo Tyres and Bharat Forge lost between 0.5% and 1.9% after brokerage CLSA reduced its 2013-14 earnings forecast for these firms by 3-8% and maintained underperform rating on the stocks.
• Adani Power closed 7.5% lower, after shedding as much as 8.3%, a day after its chief executive said a lack of clarity on coal supplies has forced the firm to put on hold its plans for capacity expansion of 6,500 megawatts.
• Tata Power bucked the falling trend and closed 1.6% higher to Rs92, after the utility said it would buy BP Alternative Energy Holding’s 51% stake in joint venture Tata BP Solar for an undisclosed amount.