Markets drop to 2-month low, below 17,000

Markets drop to 2-month low, below 17,000

Mumbai: India’s main stock index fell below 17,000 on Wednesday for the first time in two months, dropping more than 1% on concerns shaky global investor sentiment could hit foreign portfolio inflows.

Asian shares were trading lower after European and US markets fell sharply on Tuesday on increasing concerns the Greece debt crisis could spread to other weaker countries in the euro zone.

By 11:19am, the 30-share BSE index was down 1.23% at 16,927.19, with financial issues leading the drop. Twenty-three of its components were trading in the red. The 50-share NSE index was down 1.4% at 5,077.70.

The benchmark, which is down more than 3% so far in 2010, hit 16,858.23 in early trade, its lowest level since March 3.

“The market is reacting to global cues and will do so for few more days," said Jigar Shah vice-president of equity sales at brokerage Motilal Oswal. “But a steep downside from here is not likely unless things turn really bad globally."

Investors are worried the euro zone crisis could hit foreign fund inflows, which are a key driver for the market. Foreign funds have pumped $6.5 billion into Indian equities so far in 2010 after a record $17.5 billion inflow in 2009.

Top lender State Bank of India shed 1.2%, while rivals ICICI Bank and HDFC Bank dropped 2.3% and 2.7% respectively. Mortgage lender Housing Development Finance Corp was down 1.8%.

Energy giant Reliance Industries, which has the highest weight on the Sensex, fell 1% to Rs1,010.65.

Metal makers extended losses as base metal prices fell. Shanghai copper dropped to near a three-month low following a tumble in London in the previous session.

Tata Steel was down 2.5%, while Sterlite Industries and Hindalco shed 4.8% and 2.3% respectively.

In the broader market, losers were more than thrice the number of gainers on volume of 187 million shares.

The MSCI index of Asia ex-Japan stocks was down 1.8%. Markets in Japan, Korea and Thailand are closed for public holiday.

European and US stocks closed sharply lower on Tuesday, with the Dow Jones industrial average shedding 2% and the pan-European FTSEurofirst 300 falling nearly 3%.