Mumbai: Shares dropped 1.9% on Thursday to post their lowest close in six weeks, as investors cut their exposure to risky assets amid concerns about the impact of high interest rates and slowing economic growth on corporate earnings.
The benchmark index has lost 6.3% over the last six sessions, in their longest losing streak in more than three months.
The market sentiment was also dented by the euro zone debt crisis and its impact on the global economy and the financial system.
Mint’s Krishna Merchant talks about weak European cues and rising inflationary pressures bringing down the Sensex and Nifty
Shares in energy major Reliance Industries led the losses and ended 4.5% lower at Rs809.95, as institutional investors pared their holdings in the index heavyweight. The stock is down nearly a quarter this year.
The main 30-share BSE index ended down 1.87%, or 314.16 points, at 16,461.71, with all but three of its components closing in the red. The index had turned positive briefly during the day.
“There is a clear recognition of the fact that corporate earnings will remain under pressure until we see some fiscal as well as structural changes,” said Anshu Kapoor, private wealth head at Edelweiss Global Wealth Management.
“The Europe problem is not going to be solved overnight. So, there is more downside from these levels. This is going to be a painful, long and tiring journey for investors in the near-term,” he said.
The benchmark is down nearly 20% in 2011. Foreign portfolio investors have bought equities worth about $663 million so far this year, sharply down from $29 billion they invested in 2010.
The Reserve Bank of India has been among the most aggressive globally, increasing rates 13 times since early 2010, and denting consumer spending and investment by companies while inflation remains near double digits.
Weak global demand is exacerbating the slowdown in the Indian economy whose growth this year might be well below the 8.5% heady pace in the fiscal year that ended in March.
Macquarie earlier this week downgraded its India’s growth forecast for the year to March 2013 by 1 percentage point to 6.9% due to a lack of policy reforms and the lagged impact of monetary tightening.
Markets at 3:30 pm on 17-11-2011
“The quarterly numbers of many frontline firms were poor as most of them are suffering due to higher borrowing and input costs, and slowing demand,” said Alex Mathews, head of research at Geojit BNP Paribas Financial Services.
A weaker rupee failed to trigger support for export-driven software services firms such as Infosys and Wipro amid worries that a blowup of Europe’s problems could drag the United States back into recession.
Fitch Ratings warned that it may reduce its “stable” rating outlook for US banks with large capital markets businesses because of contagion from problems in troubled European markets.
Infosys fell nearly 1% to Rs2,753.50 and Wipro dropped 1.7% to Rs367.65. The technology sector index ended 0.8% lower.
Software services company Patni Computer Systems rose 10.1% to Rs428.25, the highest closing level in more than six months, after US-listed parent iGate said it planned to delist Patni.
Markets at 3:30 pm on 17-11-2011
The delisting, expected to be completed by mid-2012, will be done through a reverse book-building process, iGate said in a statement late on Wednesday.
The 50-share NSE index ended down 1.9% at 4,934.75 points. In the broader market, losers were slightly ahead of gainers in the ratio of 2.7:1 on heavy volume of 640 million shares.
Stocks on the move
• BGR Energy Systems rose as much as 4.6% after the power equipment maker said it had bagged a contract worth Rs1,698 crore. It ended the day up 0.7% at Rs280.10.
• Suzlon fell 12% to Rs25.65. A block deal saw 2.08% of the equity changing hands. A source told Reuters later the promoters sold a 2% stake in the company.