Markets drop 0.8%; Reliance, banks fall

Markets drop 0.8%; Reliance, banks fall

Mumbai: Indian shares declined 0.8% on Wednesday, hurt by weak world markets as concernsthe US economic recovery is slowing deterred investors, withanxiety about a Europe-wide bank stress test further dampeningsentiment.

Energy giant Reliance Industries and financialscontributed the most to the main index’s .BSESN losses.

The 30-share BSE index shed 0.81% or 143.45 pointsto close at 17,471.03 points, with 27 of its components closingin the red. The 50-share NSE index dropped 0.9% to 5,241.10 points.

The US service sector showed economic growth in June, but at its slowest pace since February, heightening concerns about sluggish economic recovery in the world’s largest economy.

Investment flows into the world’s four biggest emerging economies - Brazil, Russia, India and China - slowed slightly in the first half of 2010, but growth rates and the pace ofdealmaking remain strong, data shows.

Foreign funds have pumped in around $6.8 billion in Indianequities so far in 2010, with a portion of it parked in theprimary market. The index is barely changed so far this year. The funds had pumped in a record $17.5 billion in 2009,which helped the benchmark index gain 81%.

Market participants expect Indian equities to move up on better corporate earnings propped up by robust economic growth.

“We still argue for greater upside than downside for the market," Morgan Stanley said in an India Strategy note. Morgan Stanley said its bear case calls for 18% downside to the BSE Sensex over the next six months. “The base case is that we are heading higher and we rate the probability of our bull case higher than our bear case."

Corporate taxes during April-June rose 21.65% on the year to Rs43440 crore,the finance ministry said in a statement on Tuesday.

“The fundamentals of the economy are encouraging. The tax collection figures and direction of budget deficit are positive developments," said Rakesh Rawal, head of private wealth management at Anand Rathi.

“Undoubtedly, the scope of growth in India can attract much more fund flow."

Rawal said that though in the near term the market may stay subdued to the uncertainties regarding global developments, the long-term outlook was definitely optimistic.

The June-September annual monsoon, vital for India’s trillion-dollar economy, has picked up after a subdued spell and has covered the entire country, brightening the prospects for farm output and rural incomes.

Billionaire Mukesh Ambani-led Reliance Industries, which has the highest weight on the Sensex, declined 1.8% to Rs1,052.95.

Financials were pulled down by broader weakness and on expectations of another round of rate hike this month after last week’s surprise move.

Reserve Bank of India is expected to hike rates again in itsquarterly review on 27 July after a surprise increase last Friday to contain inflation worries, a Reuters poll showed on Monday.

Top lender State Bank of India shed 0.4% while leading private sector rivals ICICI Bank and HDFC Bank dropped 1.5% and 1.2% respectively. Mortgage lender Housing Development Finance Corp closed 1.3% lower.

Tata Steel, the world’s eighth-largest steelmaker, shed 1% after it said on Tuesday sales from its Indian operations stood at 1.4 million tonne in April-June, almost flat compared with the same period last year.

Declining shares outnumbered advancing ones in the broader market in the ratio of 1.2:1, amid a relatively lower volume of 382 million shares.

MSCI’s all-country world stock index was down 0.7% by 3:46pm, while the emerging market index dropped nearly 1%.


Leading telecom companies Bharti Airtel and Reliance Communications rose 1.9% and 1.6% respectively.

A government statement said the telecoms ministry has set up a panel to look into mobile firms’ concerns over the sector regulator’s proposals, including levying a one-time fee on 2G radio spectrum.

Retailers Pantaloon Retail, Shoppers Stop, Trent and Vishal Retail jumped between 3.5% and 11.5% after India on Tuesday took a tentative step towards opening up the organised retail sector to foreign companies.

Non-ferrous metals producer Sterlite Industries dropped 2.1% to 159.35 rupees as London copper prices fell more than 1% on weak demand outlook.

Power Grid Corp of India climbed 0.5% to Rs102.60 after its board approved an investment of Rs2,034 crore in three projects.