Mumbai: The BSE Sensex dropped 0.3% on Friday, after scaling a 30-month high in the previous session, as slackening growth in the US economy dampened sentiment for riskier assets across the global markets.
Shares in outsourcing companies such as Infosys Technologies and Wipro fell more than 1% on fears that a gloomy outlook for the US economy would crimp new orders from the biggest export market for Indian software firms.
Data showed on Thursday US jobless claims at a nine-month high and the first contraction in a year in a volatile US regional manufacturing index, revived fears that the United States may be sliding back into recession.
The BSE Sensex ended down 0.29%, or 53.12 points at 18,401.82, with 21 of its components closing in the negative zone. The index turned positive briefly during the day and then fell as much as half-a-percentage point.
”The sell-off in the overseas markets weighed on the investor sentiment,” said Neeraj Dewan, director of Quantum Securities in New Delhi. ”The undertone of the market continues to be positive on strong liquidity and economic growth outlook.”
For the week, the stock market rose 1.3% - its third consecutive weekly rise. The index had hit 18,475.27 points during trade on Thursday, its highest since February 2008.
The index is up 5.4% so far this year outperforming regional peers such as Japan’s Nikkei average and Hong Kong’s Hang Seng index that are down 13% and 4%, respectively.
So far this year, foreign institutional funds have invested a net $11.8 billion in shares, adding to last year’s record $17.5 billion inflows, lured by strong economic growth and corporate earnings outlook.
India’s economy, Asia’s third-largest, is forecast to expand 8.5% this year, the fastest pace among major economies after China, while the developed world struggles to keep a recovery on track.
Shares in Infosys, India’s No. 2 software services exporter, fell 1.2% to Rs2,769.20 and third-ranked Wipro ended 1.8% lower at Rs411.65. Infosys and Wipro earn more than half their revenue from the United States.
Bank counters, which had seen positive momentum in the past few sessions on a firm demand outlook, also took a breather in select stocks. India’s No. 2 lender, ICICI Bank, fell 1.8% to Rs994.50.
Larsen & Toubro, the largest engineering and construction firm, rose 2.8% to 1,869 rupees. Dealers said the rise was helped by the cabinet’s clearing of changes to a bill aimed at opening up the $150-billion nuclear power market.
In April, Larsen & Toubro had signed a preliminary agreement with British power system company Rolls-Royce to explore opportunities in nuclear power.
State-run Bharat Petroleum Corp(BPCL.BO) ended 3.2% higher at 697.85 rupees after the company said it had agreed to buy stakes in Australian shale gas assets from Norwest Energy.
In the broader market on Friday, losers were ahead of gainers in the ratio of 1.2:1 on a total volume of 428 million shares.
The broader 50-share NSE index ended 0.17% lower at 5,530.65 points.
Elsewhere, world stocks as measured by MSCI and Thomson Reuters were down nearly 1% each on the day. The pan-European FTSEurofirst 300 was down 0.9%.
Shares in Crest Animations(CRCO.BO) ended up nearly 10% at Rs96.15 after the company said late Thursday it plans to consider corporate restructuring at a board meeting scheduled on 23 August.
SpiceJet rose 1.8% to Rs71.90. Bank of America-Merrill Lynch raised its price target on the budget airline to Rs91 from 77 and retained its ’buy’ rating. The stock rose as much as 4.5%.