Business | Markets
Indian shares drop 1.9% as traders lock in profits
Indian shares snapped a five-day rally and fell 1.9 per cent on Tuesday, led down by ICICI Bank and Infosys, as investors locked in profits on concerns about high interest rates hurting growth.
- Reuters
- Published: 21:17 August 12, 2008
Bangalore: Indian shares snapped a five-day rally and fell 1.9 per cent on Tuesday, led down by ICICI Bank and Infosys, as investors locked in profits on concerns about high interest rates hurting growth.
Traders said a better-than-expected 5.4 per cent rise in factory output in June failed to lift sentiment, as the expansion was far below double digits seen in 2006 and early 2007 and the outlook was marred by rising borrowing costs.
State Bank of India, the country's largest lender, raised its prime lending rate by 100 basis points to an annual 13.75 per cent effective on Tuesday.
The increase followed a half percentage point hike in the key lending rate by the central bank on July 29 to a seven-year high of nine per cent to calm inflation running at 12 per cent, the highest in more than 13 years.
The main 30-share BSE index ended down 1.88 per cent, or 291.79 points, at 15,212.13, after rising 6.4 per cent in the previous five sessions.
The benchmark fell as much as 2.4 per cent during trade after starting up 0.5 per cent. All but five of the index components lost ground.
"There will be consolidation at these levels, and investors should use sharp dips for fresh buying," said Neeraj Dewan, a director at Quantum Securities. "The market looks good in the short to medium term if nothing goes wrong with the oil prices."
Oil prices
Prices of oil, India's biggest import, have fallen more than $30, or around 23 per cent, from a record above $147 a barrel touched on July 11.
The BSE index, which is down 25 per cent in 2008, has rebounded 21 per cent since falling to a 15-month low last month after a sharp drop in the oil prices eased concerns of further monetary tightening.
JM Financial Services said in a report the BSE index looked set to get closer to its short-term target of 16,000 this week, after having crossed important resistance of 15,300.
Brokerage India Infoline, however, said the market was still facing headwinds, both local as well global, and investors should not get get carried away by momentum as the trend could reverse rapidly.
No. 2 lender ICICI fell 4.2 per cent to Rs738.40, its biggest single-day loss in two weeks, as investors locked in profits after the stock had jumped more than 20 per cent in five days after inflation expectations eased.
Infosys Technologies fell four per cent to Rs1,603.70 on renewed fears of worsening global credit crisis after Swiss bank UBS reported worse-than-expected results.
In the broader market, 1,559 losers led 1,097 gainers on volume of 315 million shares.
The broader 50-share NSE index fell 1.47 per cent to 4,552.25.
Elsewhere in the region, Colombo's All-Share index ended down 0.7 per cent at 2,447.18.
Currency: Rupee weakens
The Indian rupee weakened yesterday as losses in the local share market raised expectations of more foreign fund outflows and a stronger dollar overseas weighed on sentiment.
The partially convertible rupee ended at 42.37/38 per dollar, 0.5 per cent weaker than 42.155/165 at close on Monday.
"There was more of share index related buying than anything else today. We had major dollar demand from foreign banks and a mild demand from some corporates," said the chief dealer with a state-run bank.
- Reuters
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