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Noon: Sensex falls 2%, banks, auto stocks drop

Noon: Sensex falls 2%, banks, auto stocks drop
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First Published: Tue, Feb 17 2009. 12 59 PM IST
Updated: Tue, Feb 17 2009. 12 59 PM IST
Mumbai: Indian shares fell more than 2% on Tuesday, with banks among major losers after a higher-than-expected government borrowing plan was seen as denting their outlook in the near term.
The lack of measures to help struggling industry in Monday’s budget, which doled out sops to rural voters, and weak world markets also weighed on investors.
By 12:05pm, the main BSE stock index was down 2.23% at 9,097.79 points, with all but one of its components declining. The 50-share NSE Nifty index was down 2.32% at 2,782.65 points.
Reliance Industries contributed the most to the index’s losses, falling 2.5% to 1,286 rupees.
“There’s the hangover of yesterday’s budget disappointment,” said Mehul Dedhia, assistant vice-president of sales at brokerage Sharekhan, adding falling Asian markets added to the gloom.
On Monday, acting finance minister Pranab Mukherjee said spending may have to jump later this year to shield the economy from a global slump and stem job losses, fueling fears of a spiralling fiscal deficit that is headed for a seven-year high.
There was hardly any measures to boost a faltering economy with growth at a six year low.
Top lender State Bank of India fell 2.5% to Rs1,107.20 and rival ICICI Bank dropped 4.3% to Rs391.80 on worries additional government borrowing could hurt their outlook.
Sahara Mutual Fund CEO Naresh Kumar Garg said banks stocks were falling due to pressure on their margins and as a rise in government borrowings would impact valuation of government bonds in their treasury portfolio.
India is looking to raise an extra Rs450 crore ($9.2 billion) in the 2008/09 financial year in addition to already announced market borrowing to bridge the fiscal deficit, Economic Affairs Secretary Ashok Chawla said on Monday.
Shares in auto makers, which have been battling sluggish sales, extended losses into a second day after the budget failed to deliver on expectations for lower taxes and other incentives to boost demand.
Top utility vehicle and tractor maker Mahindra & Mahindra was down 5% at Rs298.55 while leading vehicle maker Tata Motors slipped 1.4% to Rs134.25.
Asian stocks fell, with Japan’s Nikkei hitting a three-month low, while the US dollar surged as investors scrambled for safety from deteriorating global economic conditions and volatile banks.
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First Published: Tue, Feb 17 2009. 12 59 PM IST
More Topics: India | Stocks | Markets | Asia | Interim Budget 2009 |