Markets slip 0.6%; banks, autos drop

Markets slip 0.6%; banks, autos drop

Mumbai: Markets skidded 0.6% on Monday as fresh worries of a slowing global economy and a likely government decision this week on fuel price increase kept investors wary.

Financial heavyweights State Bank of India and ICICI Bank , and automakers Maruti Suzuki , Tata Motors and Mahindra & Mahindra were among the losers as rising borrowing costs were expected to crimp demand.

A government panel is expected to meet on Thursday to decide on raising prices of diesel and cooking gas, which could accelerate high inflation and dent profit margins of companies already reeling from high input and interest costs.

Headline inflation in April was at 8.66% and the central bank, which has raised interest rates nine times since mid-March 2010, is expected to again increase rates on June 16 when it reviews policy.

“Investors are taking a wait-and-watch approach. There are both fundamental and sentiment-related issues in the Indian environment which are coming in the way of clear direction," said Rakesh Rawal, head of private wealth management at Anand Rathi Financial Services.

“Inflation, high interest rates and the negative sentiment around governance are the main issues at the moment," he said.

On Sunday, police broke up a mass fast against graft led by India’s most famous yoga guru, risking more political headaches for the scandal-tainted government.

By 11:02am, the 30-share BSE index was down 0.58% at 18,269.62 points, with 26 of its components declining.

Traders said fresh concerns of a slowing global economy could impact foreign fund flows and further add to investor worries.

Japanese and Australian stocks fell on Monday after US data showed jobs in May grew the least in eight months, reflecting a global business cycle shifting to slower growth.

Financial stocks slipped on concerns rising interest rates would hit demand for loans. State Bank of India, the country’s largest lender, fell 1.1%, while rival ICICI Bank was down 0.9%. The sectoral index shed 0.7%.

Automakers fell on worries rising fuel costs could further slow growth. Top carmaker Maruti Suzuki, which posted its slowest sales growth rate in more than two years in May, was down 1.6%.

Tata Motors fell 0.9%, while utility vehicles maker Mahindra & Mahindra lost 1.6%.

Standard Chartered, the only listed Indian depositary receipt, fell as much as 20% to their lowest level since market debut in June last year, on selling by foreign portfolio investors.

India’s market regulator said late on Friday only “infrequently traded" Indian depositary shares would be allowed to be converted into the underlying shares of an issuer.

Standard Chartered’s Indian shares, which are frequently traded, would therefore not be converted into underlying shares of the British bank even after the completion of the one year time limit on 11 June, analysts said.

Foreign portfolio investors, who had built positions in the shares on hopes of an arbitrage opportunity, were selling, traders said.

Among the few major stocks to buck the trend, were telecoms firm Bharti Airtel and private sector lender HDFC Bank , both up 0.6%.

State-run iron ore miner NMDC Ltd rose as much as 1.5% after it signed a deal with Minemakers Ltd to develop phosphate deposits in Australia and said it would buy a 50% holding in the project after a joint feasibility study.

The 50-share NSE index lost 0.56% to 5,486.25 points.

In the broader market, 881 declines were ahead of 429 advances on a volume of 131.8 million shares on the NSE.