Mumbai: Markets snapped a four-day winning streak and closed 0.3% lower after touching their highest level in nearly two-and-a-half years on Wednesday, taking cues from European markets which slipped in the red.
Export-focused outsourcers led the losers with the sector index declining 1.4%, after Infosys Technologies posted a disappointing quarterly report card and said a weak European economy could curb new orders.
Infosys, which had shed 3.4% in their worst fall in more than a year on Tuesday, shed another 1.9%.
The 30-share BSE index closed 0.27% or 47.74 points at 17,928.16, with 22 of its components losing ground.
It had risen to 18,167.22 points in early trade, its highest level since February 2008.
The benchmark is still up 2.7% so far this year, outperforming the broader MSCI’s measure of Asian markets other than Japan, which has dipped 5.3%.
Foreign funds have pumped $8 billion into Indian stocks so far in 2010, after a record $17.5 billion investment in 2009.
The BSE index’s emerging market peers - China’s Shanghai Composite Index and Brazil’s Bovespa have dropped 24.6% and 7.1% respectively year to date.
Investors have gone significantly overweight Indian equities for the first time in over a year as a shaky global outlook lures cash to domestic demand plays, a BofA-Merrill Lynch survey showed on Tuesday.
Market participants were sceptical and some believed the valuations could be stretched and any negative developments overseas may bring down the risk appetite.
“There is no reason to be euphoric. Nothing drastically has changed of lateto justify such rising valuations,” said Arun Kejriwal, director of research firm KRIS.
“We keep building expectations and not all are met. Infosys, IIP (Index of Industrial Production) data are recent examples of that,” said Kejriwal.
India’s annual headline inflation remained above 10% for the fifth straight month in June, cementing expectations the central bank will raise interest rates for a second time this month to contain surging prices.
A Reuters survey showed economic growth in Asia’s third-largest economy is expected to accelerate in fiscal 2010-11, supported by a double-digit rise in industrial output and robust domestic demand.
The survey of 21 economists showed India’s economy would grow 8.4% from a year earlier in the 12 months to the end of March 2011 and 8.5% in 2011-12. The economy had expanded 7.4% in 2009-10.
Financials ignored concerns over monetary tightening and advanced on hopes economic growth will spur demand for loans.
Top lender State Bank of India gained 1.5% while private sector rival HDFC Bank climbed 1.1%.
Housing Development Finance Corp, the country’s biggest home loan financier, closed up 0.5% after it said its June quarter net profit rose by 23%.
Other software outsourcers Wipro dropped 1.9% while Tata Consultancy Services, which unveils its quarterly earnings on Thursday closed barely changed.
Energy major Reliance Industries, which has the highest weight on the Sensex, shed 0.5% to Rs1,069.05.
In the broader market, declining shares outnumbered advancing ones in the ratio of 1.3:1 in a relatively higher volume of 487 million shares.
The 50-share NSE index dropped 0.3% to 5,386.15 points.
At 1053 GMT, the FTSEurofirst 300 index of top European shares was down 0.3%.