Mumbai: Indian shares shed 1.1% on Thursday in a shaky start to the new quarter as world markets were spooked by manufacturing data that showed China’s rapid growth was cooling.
Together with lingering worries about the debt problems in Europe, concerns resurfaced about the strength of the global economic recovery and their impact on fund flows, especially toward emerging markets such as India, traders said.
“Even though our domestic fundamentals are strong, we are pressured by jitters overseas,” said Arun Kejriwal, director of research firm KRIS. “The situation overseas is uncertain and it is not likely to improve anytime soon.”
Financials were among the big losers as expectations for accelerated inflation was seen to exert pressure on the central bank to adopt a hawkish stance.
Inflation concerns rose after a senior government official told Reuters June headline inflation could rise to 11% as a direct fallout of the fuel price hike effected last week.
Leadng lender State Bank of India dropped 1.8% while rivals ICICI Bank and HDFC Bank shed 2.4% and 0.4% respectively.
Shares in Fortis Healthcare climbed 1.2% to Rs154.10 in choppy trade after the company and its founding family launched a bid valuing Singapore hospital operator Parkway Holdings at $3.1 billion, topping a rival offer by Malaysian state fund Khazanah.
The 30-share BSE index closed down 1.08%, or 191.57 points, at 17,509.33, with 25 of its components declining. The 50-share NSE index dropped 1.2% to 5,251.40.
Sentiment was also weighed down after a survey showed Indian manufacturing growth cooled in June from a surge in activity the prior month.
Top carmaker Maruti Suzuki shed 1.7% after sales growth in June slowed from the previous month, partly due to a 6-day shutdown of its plants for maintenance work.
Traders said fresh global economic worries could impact foreign portfolio inflows, which have been a key driver for the stock market. “We look to the world for direction,” Kejriwal said, adding foreign inflows were watched.
In June, the BSE index had gained 4.5%, posting its best monthly rise since March, as foreign funds invested $2.1 billion between 1-29 June.
The benchmark had fallen 3.5% in May, when foreigners had pulled out $2 billion as euro zone debt troubles dented risk appetite.
The index rose 1% in April-June, climbing for the sixth straight quarter in its longest run in at least 20 years.
Metal producers declined as prices of London base metals came off.
Non-ferrous metals producer Sterlite Industries and aluminium maker Hindalco fell 3.2% and 1% respectively.
In the broader market, losers and gainers were almost equal in number in relatively moderate volume of nearly 400 million shares.
Drug maker Parabolic Drugs closed down 13.6% at Rs64.80 on debut after opening up 2.4% from its issue price of Rs75.
Cera Sanitaryware rose 9.2% to 269.35 rupees, after it said its board would meet on 16 July to consider bonus share issue.
Redington India closed 5.1% lower at Rs360.25 after about 13.2% of total equity changed hands in a block deal on the BSE at Rs355 each.