Mumbai:Shares fell 0.7% on Monday, with Bharti Airtel sliding to its lowest close in more than two months as investors gave a thumbs down to its $10.7 billion bid to buy Kuwaiti Zain’s African assets.
“Bharti dampened the sentiment today,” said Vaibhav Sanghavi, director of Ambit Capital. Investors were concerned Bharti may have offered a high price that could strain its earnings over the near term.
Bharti, India’s leading mobile operator, began exclusive talks with the Kuwaiti telecom company for a deal that would give it a foothold in a largely untapped region, after it twice failed to reach an agreement with South Africa’s MTN Group.
Bank of America-Merrill Lynch cut Bharti to underperform from buy, saying the valuation seems rich, the growth outlook for Zain’s African portfolio appears unexciting and a potential deal could materially stress Bharti’s balance sheet.
Shares in Bharti tumbled 9.2%, their biggest fall in 4-“ months, to Rs285.40 . It was the lowest close since 27 November, 2009 and the company’s market value fell $2.4 billion to $23.4 billion.
With 5 million shares traded, they topped the volume among the main index stocks.
Financial stocks declined on higher-than-expected inflation of an annual 8.56% in January. It was the fastest pace in more than a year, putting more pressure on the central bank to raise borrowing rates.
Top lender State Bank of India fell 1.25% and rival ICICI Bank shed 1.2%.
The 30-share BSE index closed down 0.71%, or 114.24 points, at 16,038.35. Two-thirds of its components closed in the red.
Sanghavi said selling by foreign funds across regions was a concern. “Risk is being taken off the table and India is no exception,” he said.
Foreigners have pulled out $2.1 billion over the last 15 sessions from the Indian equities. The withdrawal has pushed the BSE index down more than 8% this year.
In 2009, the benchmark had jumped 81% on the back foreign inflows of $17.5 billion.
Gajendra Nagpal, CEO of Unicon Financial, said the market could rise in the run up to the national budget on 26 February.
“We could see some upside in the market next week as the budget is not really likely to be negative,” he said. “Stimulus withdrawal will be gradual and selective. Care will be taken it does not really hurt the economy and the market.”
Data on Friday showed industrial output in Asia’s third-largest economy grew at its fastest pace on record in December, smashing forecasts.
In the broader market, losers outpaced gainers in a ratio of 1.4:1 on volume of 316 million shares, lower than last week’s daily average of 351 million shares.
The 50-share NSE index closed 0.5% lower at 4,801.95.