Mumbai: Indian shares slid 2.3% on Friday, extending losses for the week to 3.25%, as shaky overseas markets, concerns about pricey stocks and below-normal monsoon rains sapped investor confidence.
Markets across Asia and Europe were muted as investors awaited a key US jobs report and as worries mounted stocks were getting ahead of fundamentals after a recent rally.
Forecasts of weak rains in the next five days and inadequate water in Indian reservoirs have raised the risk to the country’s cane and soybean crops, and could potentially hit crucial rural demand and slow down a nascent economic revival.
“Worse-than-expected monsoon takes away the recent upside to activity due to the continued easing of financial conditions and improving external conditions,” Goldman Sachs economist Tushar Poddar said.
“We think this will have a significant negative impact on rural demand.”
Leading financials such as State Bank of India and ICICI Bank led the main index lower, tracking European banking stocks that fell after Royal Bank of Scotland posted a first-half loss.
The auto sector, which includes top carmaker Maruti Suzuki and top utility vehicle maker Mahindra & Mahindra, fell 3.9%, extending a 4.4% drop in the previous session, on profit-taking.
Energy giant Reliance Industries, which has the most weight in the main index, shed 2.5% to Rs1,995.90, but rose 2% on the week.
The 30-share BSE index ended down 2.28% or 353.79 points, at 15,160.24, with 29 stocks declining, its worst close since 22 July. The 50-share NSE index fell 2.3% to 4,481.40.
Its weekly fall was the first after rising for three weeks in a row, and was the worst save China among major world benchmarks.
“Stocks in some sectors had gone ahead of the market, and investors are thinking it is a good time to take profits. The monsoon is also not progressing the way it should,” A N Sridhar, a fund manager at Sahara Mutual Fund, said.
“But we could see some buying coming in at lower levels as investors are still cautiously optimistic,” he added.
The market had climbed 16% over the previous three weeks, riding a global equities rally and driven by strong domestic and global corporate earnings.
The BSE index has piled on 88% from a 2009 low in early March, and is up 57% this year - the fourth-best performance in the world - after slumping by more than half in 2008.
But this has swelled valuations, with the BSE index trading at 17.4 times one-year forward earnings, well above other emerging markets such as Brazil, Indonesia and South Korea that trade at a multiple of about 13-14. Russia trades at 8 times.
State utility NHPC Ltd saw its IPO worth up to $1.25 billion fully subscribed soon after opening to investors on Friday in a strong response that may embolden the government to sell stakes in more firms.
“Recent IPOs have sucked some liquidity out of the system and reduced buying power,” Sridhar said.
Maruti Suzuki slid 5.3% to Rs1,291.30, while Mahindra & Mahindra dropped 5.4% to Rs834.15. Top vehicle maker Tata Motors eased 0.9% to Rs414.50. India’s auto index ended the week down 4.5%.
Automobile firms had reported better-than-expected profits in April-June, helped by lower input costs, while their July sales soared on new launches and easier finance, driving the auto index up more than a third from 13 July through Wednesday.
The country’s top lender, State Bank of India, fell 3.1% to Rs1,741.85, while private-sector rival ICICI Bank ended down 3.6% at Rs738.05. The banking sector slipped 3%.
Top telecoms firm Bharti Airtel slid 3.9% to Rs383.80. Bharti and South Africa’s MTN Group have extended exclusive talks till 31 August aimed at combining their operations to create the world’s third-largest mobile operator. Analysts say Bharti might need to sweeten its offer to clinch a deal.
In the broader market, losers led gainers by more than 2.5 to 1 on relatively moderate volume of 407.3 million shares.
Most Asian shares were lower, with MSCI’s measure of Asian markets excluding Japan down 1.4% Japan’s Nikkei edged down 0.2%.