Mumbai: India’s main stock index fell below 16,500 on Wednesday afternoon for the first time since early March, as world shares tumbled on risk aversion after Germany tightened financial regulation.
At 2:09pm, the 30-share BSE index was down 2.27% at 16,492.83 points, with 29 components declining. It had last fallen below 16,500 on 2 March. The 50-share NSE index was down 2.4% at 4,943.25.
Indian shares fell 0.9% on Wednesday in tandem with shaky world equities as investor appetite for risky assets dimmed after Germany sharpened financial regulations.
There was concern the weak global sentiment would accelerate foreign fund outflows, which have reached nearly $770 million so far this month, traders said.
ICICI Bank, the country’s second-largest lender, shed as much as 5.9% on concerns the price was high for its proposed deal to buy small private sector Bank of Rajasthan.
By 10:56am, the 30-share BSE index was trading down 0.92% at 16,720.65, with 23 of its components declining. It fell as much as 1.4% earlier. The 50-share NSE index was down 0.9% at 5,019.15.
“In the short run, our market will move depending on how global cues shape up,” said Jigar Shah, vice-president of equity sales at brokerage Motilal Oswal.
Germany, in an attack on the financial speculation on which it blames much of the euro zone’s debt crisis, on Tuesday announced a ban on some high-risk bets that prices of bonds and stocks will fall.
The BSE index has lost 4.9% this month as the euro zone debt woes triggered the foreign fund withdrawals, lowering net inflows to $5.7 billion this year.
In 2009, record purchases of $17.5 billion by foreign funds had helped the index jump 81%.
“Our view is that if the European crisis deepens and global markets suffer another leg down, it will become increasingly difficult for India to remain defensive,” Morgan Stanley said in a note on Tuesday.
“Meanwhile, save for this outcome, we remain a buyer of dips in Indian equities,” it said.
ICICI Bank was trading down 3.9% at Rs854.40, after falling as low as Rs836.75 after it agreed to buy Bank of Rajasthan, whose shares were limit up 20% at Rs119.40.
Based on the all-stock deal’s swap rate and Tuesday’s closing prices, ICICI would pay Rs188.42 per share, a premium of 89% to the small lender’s Tuesday close, valuing the business at $668 million.
“Although at 60 million rupees/branch valuations paid are in line with other old private sector banks, we believe it will take 1-2 years to ramp up the productivity of these branches,” JPMorgan said.
Metals stocks such as Sterlite Industries, Hindalco and Tata Steel were down between 0.3-3% as base metal prices declined and outlook remained uncertain.
Energy giant Reliance Industries, which has the highest weight on the Sensex, dropped 0.9% to Rs1,011.75.
In the broader market, losers led gainers in a ratio of 1.4:1 on volume of 122 million shares.