Mumbai: Indian shares fell 1.35% on Monday as investors continued to take profits after a three-month rally, with a weak start in European markets adding to the sell-off.
Trading was choppy through the day as long-term investors, who had missed an 80% rally since early March, bought at dips and lifted the market up as much as 1% at one stage.
Investors are cautious ahead of a flurry of economic data and a US Federal Reserve meeting this week, which they hope will provide surer signs a global recovery is strong enough to justify recent gains across world stock markets, analysts said.
“Global markets have become weak, and what we are seeing today is typical profit-booking,” R K Gupta, managing director of Taurus Mutual Funds, said from New Delhi.
The World Bank raised its growth forecast for India, but warned prospects for the global economy remained “unusually uncertain” and lowered its 2009 growth forecasts for most economies.
Energy giant Reliance Industries and state-run explorer Oil and Natural Gas Corp fell after the Economic Times said the oil ministry was examining a proposal to charge royalties on sale prices instead of wellhead value that mainly excluded processing, storage and transport costs.
“There has been a lack of clarity about the issue in the past few weeks. If the government is going to do this, it is definitely going to hurt profits,” Gupta said.
Reliance Infrastructure dropped 4.3% to Rs1,207.60 as investors cashed in profits after the stock tripled in value since early March.
State-run NTPC Ltd, the country’s top power producer, and private sector Tata Power were among the major losers.
ICICI Bank bucked the trend and rose 1.8% to Rs726.90 after the Mint newspaper said the bank aimed to save up to $270 million in the current year that began in April by trimming sales agents and other costs.
The 30-share BSE index ended down 195.67 points at 14,326.22 with 22 stocks declining. It climbed to as far as 14,668.40 and fell as much as 1.7% at one stage. The 50-share NSE index fell 1.8% to 4,235.25.
“Investors are undecided, and at the same time there is a lot of liquidity chasing stocks,” Gajendra Nagpal, chief executive of Unicon Financial Intermediaries, said from New Delhi.
“But the market has run up quite a bit already, and there is no trigger for it to rise significantly to the next level,” he said.
The index dropped 4.7% last week, after rallying 83% over 14 consecutive weeks in its best run in four years.
Renewed jitters about the global economy and worries about pricey stocks have dented investor confidence, while foreign portfolio inflows have slowed in the past week after they pumped in about $8 billion since early March.
But expectations for investor-friendly reforms from the government when it announces its annual budget on 6 July have provided support.
“July is going to be a critical month. Not only will the budget be presented, but companies will come out with their earnings figures as well,” Taurus’ Gupta said.
Reliance Industries, which has the most weight in the main index, fell 4.3% to Rs1,952.45. The stock has faced headwinds since last Monday, when the firm received an unfavourable court ruling related to gas supplies.
ONGC slid 1.6% to Rs993.70. Tata Power dropped 4.9% to Rs1,107.40, while NTPC lost 3.6% to Rs191.
In the broader market, losers led gainers 1,512 to 1,116 on relatively lower-than-average volume of 388.5 million shares.
By 4:00pm, the pan-European FTSEurofirst 300 index of top shares was down 1.2%.
US stock index futures pointed to a lower open on Wall Street, as shares were poised to trim recent gains ahead of the release this week of euro zone purchasing managers’ surveys and US housing sector data, which is key for consumer spending.