Markets close down 1.6% on weak world equities

Markets close down 1.6% on weak world equities

Mumbai: Indian shares posted their first weekly gain in three, but closed 1.6% lower on Friday, as world equities dipped on mounting worries that tough new austerity measures in southern Europe will dampen economic growth in the region.

Financials led the decline with State Bank of India tumbling 4% as its quarterly net profit missed street view and fell 32% on a sharp rise in bad loan provisions.

Ambit Capital retained its “sell" rating on the stock and said its balance sheet continued to be a concern.

The 30-share BSE index closed 1.57% or 271.27 points lower to finish at 16,994.60 points, but rose 1.3% for the week. Twenty-six of its components closed in the green. The 50-share NSE index dropped 1.7% to 5,093.50 points.

“The market is fairly priced at current levels. But, the European worries will continue to weigh on our markets now." said Rajen Shah, chief investment officer at Angel Broking.

“The next best trigger is monsoon. The direction for the market will be dependent on how monsoon fares."

Meanwhile, India’s annual headline inflation in April eased in line with expectations, adding to the likelihood that the central bank will hold off on further monetary policy tightening ahead of a scheduled review in July.

The benchmark index is down 2.7% year to date, even as foreign funds have invested a net of nearly $6 billion in Indian equities so far this year.

In 2009, foreign funds pumped in a record $17.5 billion, which saw the benchmark index gain 81%.

Energy giant Reliance Industries, which has the highest weight on the Sensex, dropped 2.6% to Rs1,043.55.

Leading private lenders ICICI Bank and HDFC Bank declined 1.5% and 0.6% respectively.

Mortgage lender Housing Development Finance Corp shed 1.1%.

Metals makers edged lower as euro zone sovereign debt worries and a firm dollar dragged industrial metals lower, while concerns of further fiscal tightening in number one metals consumer China added to the negative sentiment.

Non-ferrous metals producer Sterlite Industries and aluminium maker Hindalco dropped 3.8% and 3.3% respectively.

Tata Steel, the world’s eighth-largest steel maker, closed 4.7% lower.

Top mobile operator Bharti Airtel bucked the trend and climbed 2.2% as the telecom minister said India will listen to mobile phone operators’ concerns before finalising plans to slap new fees on second-generation spectrum.

The stock had fallen to its lowest close in three-and-a-half years on Thursday and had shed over 12% in the last three sessions, hurt by the new spectrum fee proposal.

In the broader market, gainers outnumbered losers in a ratio of 2:4 on a relatively lower volume of 311 million shares.