Mumbai: Indian shares fell 0.8% on Monday to their lowest close in two months, as niggling worries about the health of the world economy and uncertainty over corporate earnings reduced risk-appetite across Asia and Europe.
Major losers spanned companies from energy giant Reliance Industries and engineering and construction conglomerate Larsen & Toubro to top telecom firm Bharti Airtel.
Analysts said foreign funds, which had been the main driver for the market to rally nearly a half in the June quarter, were on the backfoot now with prospects for a swift world economic recovery fading.
“Risk-appetite abroad is going to determine how well emerging markets perform,” Avinash Gupta, assistant vice president of equity research at Bonanza Portfolio Ltd, said from New Delhi.
“To that extent, global markets are going to impact India.”
The 30-share BSE index ended down 0.77%, or 103.90 points, at 13,400.32, with 21 stocks declining, after falling as much as 2.1% during trade.
It was the lowest close since 15 May. The next trading day, the benchmark had jumped 17% after Prime Minister Manmohan Singh’s coalition won re-election comfortably and spurred hopes for fast-paced reforms to boost growth.
But the budget last Monday focused on social spending programmes, had little to offer for reforms and set a huge deficit of 6.8% of gross domestic product, the highest in 16 years.
“The market had run up quite a bit, and the disappointing budget provided the trigger for a correction,” Gupta said.
After rallying 22.5% since the election verdict, the BSE index dropped 9.4% last week in its biggest weekly fall in eight months that took it below the close on 18 May.
Sentiment was also hit after monsoon rains, crucial for India’s domestic demand-led economy, made a weak start in June.
“For now, there is no fresh trigger to attract investors to the market,” said Pisupati Subramanyam, president at Ventura Securities.
Asian shares fell on Monday, with Japan’s Nikkei losing 2.6%, while MSCI’s measure of other Asian markets dropped 2.8%.
At 1014 GMT, the FTSEurofirst 300 index of top European shares was down 0.4%.
“We are going to react to overseas markets for a while, and the amount of foreign fund inflows and liquidity coming into the market will determine how it performs,” Subramanyam said.
However, analysts do not see a significant fall in shares as longer-term prospects for the market remained bright. The benchmark is still up by more than two-thirds from a 2009 low in early March, and has risen almost 40 this year after losing more than half its value in 2008.
Investors will watch corporate results for clearer signs of an economic recovery, traders said. For a preview on Asian firms’ April-June earnings.
Reliance Industries, India’s largest-listed firm with the most weight in the main index, fell 1.7% to Rs1,747.85, while Larsen & Toubro dropped 2.1% to Rs1,330.35.
Bharti Airtel, which is in exclusive merger talks with South Africa’s MTN, eased 2.1% to Rs766.20, while Reliance Infrastructure slid 6.1% to Rs966.65.
In the broader market, losers led gainers by more than 3.5 to 1 on relatively light volume of 292.4 million shares.
The 50-share NSE index fell 0.75% to 3,974.05.