Markets fall 0.9%; banks, RIL drag

Markets fall 0.9%; banks, RIL drag

Mumbai: Shares shed 0.9% in thin trade on Wednesday, a day before monthly derivatives contracts expiry, dragged by a sell-off in banks, on worries over worsening asset quality and slowing credit growth, and Reliance Industries.

The main 30-share BSE index closed down 146.10 points at 15,727.85, with 18 of its components declining. The benchmark, which fell 0.6% on Tuesday, opened relatively flat and dipped as much as 1.3% on the day.

The BSE index has fallen more than 20% this year, making it one of the worst performing major index. Foreign funds have pulled out a net $470 million this year, compared with net inflows of more than $29 billion in 2010.

“Banking sector is under pressure because of concerns over asset quality, while the credit growth is lower," said Naresh Kumar Garg, chief executive at Sahara Mutual Fund.

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Mint’s Krishna Merchant gives you a lowdown on the winners and losers of Wednesday’s trade

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The banking sector index closed down 1.98%, with top private lender ICICI Bank leading the losses, closing 3.9% lower. The country’s top lender State Bank of India shed 2.02%.

Indian banks’ non-performing assets, or bad loans, are expected to rise to about 2.6% of their total assets in the fiscal year ending March, from 2.3% a year ago, ratings agency Crisil said earlier this year.

Borrowers are finding it difficult to repay loans amid near double-digit inflation, high interest rate and a slowing economy.

India’s headline inflation has barely budged from above 9% for a year now despite 13 interest rate increases dealt by the Reserve Bank of India since March 2010.

Jindal Steel and Power was the top loser, shedding more than 7.1%, after a newspaper report said government was likely to cap costs of power supplied from projects with captive coal blocks and assured fuel supply from Coal India.

If such a move materializes, it would be negative for those companies with a combination of captive coal and selling power in the merchant market such as Jindal Steel and Power, Barclays said in a report on Wednesday.

A spokesman for Jindal Steel and Power did not immediately offer a comment.

Shares in oil marketing firms Indian Oil Corp., Bharat Petroleum Corp. and Hindustan Petroleum Corp. fell between 1.7% and 2.99%, after crude oil prices rose 5% in less than two weeks, on Iran’s threat to halt oil shipments through the Strait of Hormuz.

The 50-share NSE index fell 0.94% to 4,705.80. In the broader market, there were about two losers for every gainer on relatively lighter volume of about 439.25 million shares.

Stocks that moved

• Auto component makers Exide Industries, Apollo Tyres and Bharat Forge lost between 0.5% and 1.9% after brokerage CLSA reduced its 2013-14 earnings forecast for these firms by 3-8% and maintained underperform rating on the stocks.

• Adani Power closed 7.5% lower, after shedding as much as 8.3%, a day after its chief executive said a lack of clarity on coal supplies has forced the firm to put on hold its plans for capacity expansion of 6,500 megawatts.

• Tata Power bucked the falling trend and closed 1.6% higher to Rs92, after the utility said it would buy BP Alternative Energy Holding’s 51% stake in joint venture Tata BP Solar for an undisclosed amount.