New Delhi: Indian shares seesawed on Monday after an earlier-than-expected rate rise by the central bank, while disappointing US jobs data added to fears of a sharp global slowdown in the second half of the year.
Reliance Natural shed more than a quarter of its value after a deal to fold into sister firm Reliance Power valued the company at $1.5 billion, lower than its market capitalisation on Friday.
Shares in lenders such as State Bank of India and ICICI Bank were slightly positive after falling in early deals. The banking sector index was trading 0.3% up after falling as much as 0.5% early.
The real estate sector index was down 0.1%.
The Reserve Bank of India raised interest rates late on Friday, almost a month earlier than expected, and analysts said it would likely follow up the quarter point hike with another move on 27 July, due to concerns about inflation above 10%.
At 10:39 am, the main 30-share BSE index was up 0.06% at 17,472.48, with 11 of the components falling. The index opened higher before turning negative. The 50-share NSE index was up 0.12%.
The benchmark had dropped 0.6% last week, its first weekly loss in three.
“Global cues are not great and the markets are not cheap at this level,” said Gajendra Nagpal, Chief Executive at New Delhi brokerage Unicon Financial Intermediaries.
“But the positive thing is the market seems to have taken the interest rate increase in its stride and is willing to move on,” he said.
India’s services sector expanded at its fastest clip in two years last month, led by increases in business expectations and new orders, a survey showed.
After dipping slightly in May, the HSBC Markit Business Activity Index, based on a survey of 400 firms, rose to 64.0 in June from 58.2 last month, pointing to a substantial rate of growth. Any figure above 50 indicates expansion.
Macquarie analysts wrote in a note rising interest rates may not immediately translate into higher lending rates due to large differential between deposit growth and credit growth, and would likely curb margins of lenders.
High risk sectors like real estate and retail loans could be the first ones to see an increase in rates, they said.
Shares in Reliance Natural were down 26% at Rs46.85, after falling to 45.50, their lowest level since 21 May. Reliance Power shares were up 3.1% at Rs180.65, after climbing to 189.80, their highest in more than a year.
Reliance Natural Resources shareholders will receive one Reliance Power share for every four they hold, the firms, both controlled by billionaire Anil Ambani, said on Sunday.
In the broader market, 1,475 gainers were ahead of 931 losers on moderate volume of about 89 million shares.
Ashok Leyland rose 2.5% after the firm reported late on Friday its June commercial vehicle sales more than doubled from a year earlier.
Power Grid Corp of India were down 1.3% after the company said its board approved a follow-on public offer of 20% of existing equity.
Ankit Metal & Power rose by the 10% upper limit on news the company would consider an issue of rights shares.
Media firms Television Eighteen India Ltd, IBN18 Broadcast and Network18 Media rose after the companies said their boards would meet on 7 July to consider a restructuring proposal.