Business | Markets
Indian shares fall 3.25% as oil cripples world markets
Indian shares fell 3.25 per cent on Monday to their lowest close in nearly three months as spiralling oil prices crippled markets worldwide, but Reliance Communications rose on reports of progress in merger talks with South Africa's MTN Group.
- Reuters
- Published: 21:27 June 9, 2008
Mumbai: Indian shares fell 3.25 per cent on Monday to their lowest close in nearly three months as spiralling oil prices crippled markets worldwide, but Reliance Communications rose on reports of progress in merger talks with South Africa's MTN Group.
Traders said inflation in India, which imports 70 per cent of its oil, could climb to double digits in the near term and cause an increase in interest rates, crimping demand and hastening a slowdown in earnings.
Software services companies, which get more than half their revenue from the United States, fell on signs the US economy was heading for stagflation.
Bellwether Infosys Technologies fell 4.5 per cent to Rs1,904.05 and top exporter Tata Consultancy Services lost 4.6 per cent to Rs915.65.
"The huge surge in crude prices has hurt the market a lot and a recovery may not be as sharp unless oil prices drop as fast as they have risen," said Jayesh Shroff, a fund manager with SBI Mutual Fund.
Oil was trading at above $137 a barrel yesterday after soaring to a record of more than $139 on Friday when it extended two-day gains to more than $16 a barrel.
The BSE 30-share index ended down 506.08 points at 15,066.10, its lowest close since March 19, with 27 components in the red.
The benchmark slipped below 15,000 during trade for the first time since mid-March, falling as much as 4.7 per cent. It had lost 5.1 per cent last week and is down about 26 per cent in 2008.
Swiss bank Credit Suisse said it saw the index falling to a 10-month low of around 13,000 points by end-2008. "The market is still not pricing in the much lower earnings growth being forecast by corporates and banks," said Nilesh Jasani, head of research at the Indian unit.
"There is going to be a crowding out in terms of government expenditure and even the inflation is going to be much more than what the market expects."
Reliance Communications rose 1.3 per cent to Rs554.10, its highest in a week, after a source said the No. 2 mobile operator and MTN were discussing the ratio for a share swap to create a global top-10 telecoms firms.
Top listed firm Reliance Industries led the fall in the index, dropping 3.4 per cent to Rs2,163.10, its lowest close since March 19. On Friday, the refiner and petrochemical company had said a unit in its plant in western Maharashtra had been shut by a fire.
Deepak Singh, a Bangalore-based analyst, said heavy selling by foreign institutional investors (FIIs) was a big concern for the market, which had risen 47 per cent in 2007 on the back of foreign inflows of a record $17.4 billion.
"The FII figure in the last fortnight clearly tells us that they have been queuing up to exit," he said.
Data showed foreign funds had dumped shares worth $879 million in the four days to Thursday, taking the total outflow so far this year to $4.8 billion.
In the broader market, losers outnumbered gainers in the ratio of nearly 5 to 1 on total volume of more than 257 million shares.
Pakistan: Karachi index drops
Pakistan's benchmark Karachi Stock Exchange 100 Index fell 226.34 points, or 1.7 per cent, to 12,908.22 at the 2.15pm local-time close. The index has risen seven per cent in the last week.
MCB Bank fell by Rs15.27, or five per cent, to Rs290.23. National Bank of Pakistan lost Rs8.75 to Rs166.25. United Bank declined Rs5.55 to Rs105.56. Habib Bank fell Rs6.52, or three per cent, to Rs206.50.
- Bloomberg
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