Business | Markets
Indian shares slide 3% on rising inflation worries
Indian shares fell 2.96 per cent yesterday to their lowest close in more than three weeks, led by banks on fears inflation was rising quicker than expected and the central bank would need to tighten policy further.
- Reuters
- Published: 23:42 August 21, 2008
Mumbai: Indian shares fell 2.96 per cent yesterday to their lowest close in more than three weeks, led by banks on fears inflation was rising quicker than expected and the central bank would need to tighten policy further.
State Bank of India dropped 7.1 per cent to end at Rs1,342.25, its lowest since July 29, and ICICI Bank slid 5.2 per cent to Rs643.10. The bank sector index fell 5.2 per cent.
Traders said talk was data after market hours would show annual inflation coming in above forecasts of 12.63 per cent as at August 9, which in any case would be the highest since annual numbers in the current series became available in April 1995.
Investors were also edgy after regional shares fell and Europe opened weak on higher oil prices and credit jitters.
"Inflation and rising crude prices are playing out today," R.K. Gupta, managing director at Taurus Mutual Fund, said. "Market players suspect inflation may come in higher than anticipated, thus further weakness in the last hour."
The 30-share BSE index fell 434.50 points to 14,243.73, its lowest close since July 29, with all but one of its components falling.
The benchmark is down almost 30 per cent so far this year, with foreign funds net sellers of more than $7 billion of stocks.
Oil, India's biggest import, rose to more than $116 a barrel on supply concerns after Russia expressed its displeasure over a US-Poland missile shield pact.
Rising interest rates and inflation as well as signs of slowing activity in India have undermined investor sentiment. JPMorgan recently cut its growth forecast for Asia's third largest economy in 2009-10 to 7.5 per cent from eight per cent.
Outsourcing companies dropped on concerns about demand in the US, where they earn more than half their revenue.
Tata Consultancy Services slipped 2.6 per cent to Rs817.75 and Infosys shed two per cent to Rs1,665.45.
Reliance Industries fell 1.4 per cent to Rs2,212.35. The refiner has delayed the export of at least one gasoline cargo and cut liquefied petroleum gas sales due to a problem at its fluidised catalytic cracking unit, oil trade sources told Reuters on Wednesday.
Ranbaxy Laboratories bucked the trend to rise 1.5 per cent to Rs513.40. The stock has risen 2.7 per cent this week since the start of Japan's Daiichi Sankyo's open offer to buy a 20 per cent stake in the firm at Rs737 a share.
In the broader market, 1,919 losers overwhelmed 731 gainers on volume of 259 million shares.
The 50-share NSE index fell 2.99 per cent to 4,283.85, its lowest close since July 29.
Karachi's 100-share index dropped 2.75 per cent to 10,236.66.
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