Mumbai: Shares extended losses to 2% on Monday afternoon, as investors were spooked by fears of an interest rate hike in the near term and concerns developed economies may divert funds away from emerging economies.
At 2:58pm, the 30-share BSE index was down 2.14% at 19,269.65 points, with 27 components declining. The 50-share NSE index was down 2.2% at 5,776.25 points.
Markets trimmed some of their losses in the morning after initially falling more than 1%, as investors thought rate rise concerns were overdone and picked up bargains.
Export-focused software services bellwether Infosys Technologies climbed 0.4% in anticipation of strong quarterly earnings on Thursday, and hopes for an optimistic guidance.
Financial stocks were mixed after sliding last week, when a spurt in food inflation to the highest in more than a year sparked talk of a hawkish monetary stance by the central bank when it reviews policy on 25 January.
“There has been an overreaction to rate worries,” said Prakash Diwan, head of institutional business at Networth Stock Broking.
Foreign funds have invested a net of around $202 million in Indian equities in the first four days of this year, but the outlook is uncertain. In 2010, record portfolio equity inflows of $29.3 billion had lifted the main stock index 17.4%.
By 11:04 am,the 30-share BSE Index was trading down 0.77% at 19,540.75, with 18 of its components declining. It had fallen as much as 1.1% early, extending last week 4% slide.
The banking sector index recouped early losses of 1.3% and was down 0.5%.
State Bank of India, the country’s biggest lender, and main rival ICICI Bank were up 0.5% and 0.1% respectively.
However, HDFC Bank and Housing Development Finance Corp fell 3.2% and 3.1% respectively.
Reserve Bank of India governor said late on Friday a pause in its tightening cycle should be interpreted as a comma and not a full stop, indicating further monetary policy tightening going ahead.
Automobile shares were in reverse gear as a rise in borrowing costs could hurt consumer demand for vehicles.
Tata Motors, Hero Honda, Maruti Suzuki and Mahindra & Mahindra slipped between 0.8% and 2.2%, while the BSE auto index was down 1.1%
In the broader market, losers beat gainers in the ratio of 1.5:1 were nearly equal in number on volume of 87 million shares.
The 50-share NSE index was down 0.8% at 5,855.10.
The MSCI’s measure of Asian markets other than Japan was down 0.4%, while Japanese markets were closed for a public holiday.
Software services firm Patni Computer was up 1.9% at rS 448.90 in volatile trade as sources said US software firm iGate has finalised a deal to buy the Indian firm.
Sugar producers were in the red as trade and industry sources said late on Friday, that unrestricted exports of 500,000 tonnes of sugar from India may be delayed.
Shree Renuka Sugars, Balrampur Chini, Dhampur Sugar Mills and Bajaj Hindusthan were down between 1.5% and 2.6%.