Mumbai: Indian shares declined 1.1% on Thursday, led by losses in financials, on concerns of further monetary tightening after the central bank raised interest rates at its policy review as it battles stubborn inflation.
Also See | Taking a hit (PDF)
The Reserve Bank of India (RBI) raised interest rates for the eighth time since last March, in line with expectations, and warned both of inflationary pressures and emerging risks to growth, leading to fears of further rate hikes.
“RBI is acknowledging the risks due to inflation and in turn a risk to growth,” said Rajat Rajgarhia, director of research at Motilal Oswal Financial Services Ltd.
“Its anti-inflationary stance will continue into the next quarter, and we expect it to hike rates further from hereon.”
The 30-share Bombay Stock Exchange (BSE) index dropped 1.14%, or 208.82 points, to 18,149.87, with 22 components closing in the red.
Foreign funds have pulled out around $1.8 billion (Rs8,136 crore) of Indian equities since the start of January to mid-March, sending the benchmark sliding 11.5% in 2011.
Leading lenders such as State Bank of India and ICICI Bank Ltd and HDFC Bank Ltd fell between 0.1% and 1.4%, respectively. Mortgage lender Housing Development Finance Corp. (HDFC) tumbled 3.7%.
A spike in the yen pulled down top car maker Maruti Suzuki India Ltd by 4.4%.
“If the yen continues to appreciate against the dollar, it would have a negative impact on the raw materials that Maruti consumes,” said Ajay Shethiya, a research analyst with Centrum Broking Pvt. Ltd.
The yen hovered near a record high against the dollar, with speculators building more bearish bets in the US dollar and keeping alive the risk of intervention by the Japanese to stem the yen’s rise.
Japanese military helicopters dumped water on an overheating nuclear plant, while the top US nuclear regulator warned that the cooling pool for spent fuel rods at reactor No 4 may have run dry and another was leaking.
Reliance Communications Ltd, the country’s second largest mobile services operator, jumped 3.5% after Citigroup upgraded the beaten down stock to “buy” from “sell”, saying a “good” asset was available at a discount.
It was the most traded stock on the National Stock Exchange (NSE), and around 27.5 million shares were traded together on BSE and NSE, about 2.6 times their 90-day average daily volume.
The brokerage also upgraded Idea Cellular Ltd, the sixth largest mobile operator, to “buy” from “sell” saying “growth was available at a reasonable price”, sending its stock 2.6% higher.
These stocks have lost 26.6% and 11%, respectively, this year, faring worse than the broader markets.
Losers outpaced gainers in the ratio of 1.4:1 in the broader markets, while 227 million shares changed hands on BSE, lower than the 30-day average volume of 277 million.
The 50-share NSE index declined 1.2% to 5,446.65.
The MSCI’s measure of Asian markets other than Japan dropped 0.9% by 1016 GMT, while Japan’s Nikkei shed 1.4%.
Metal producers declined as base metal prices dropped in Shanghai on fears the worsening nuclear crisis in Japan would hurt the global economy.
Hindalco Industries Ltd and Tata Steel Ltd fell 2.5% and 0.8%, respectively. Sterlite Industries India Ltd bucked the trend and gained 0.2%.
Henkel India Ltd rose nearly 5% after Jyothy Laboratories Ltd said late on Wednesday it had bought a stake in the detergents maker from Tamilnadu Petroproducts Ltd.
Tamilnadu Petroproducts jumped 9.8%, while Jyothy Labs tumbled 11.8%.
Financial services firm Reliance Capital Ltd firmed 1.2% to Rs583.45 after chief executive Sam Ghosh told Reuters the company expects new insurance premiums to grow at more than 15% in the next fiscal and 20% thereafter, as it signs up clients in smaller towns and cities.
Graphic by Paras Jain/Mint
Neha Singh contributed to this story.