Mumbai : India's benchmark stock index fell the most in two months after inflation stayed above 15 per cent, suggesting credit may soon be tightened.
Larsen & Toubro sank after its first quarterly sales drop in seven years.
Housing Development Finance Corporation, India's biggest mortgage lender, slipped 3.6 per cent, its steepest one-day slide in three months.
The pace of food price increases has exceeded 15 per cent for nine weeks. The next monetary policy meeting is on January 29.
Larsen & Toubro sank 6.8 per cent, the most in six months after quarterly sales fell and it cut its revenue growth target.
"The market was already feeling the weight of inflation," said Kishor Ostwal, managing director of CNI Research (India), a publicly traded equities research provider in Mumbai. "Larsen's results added to its woes."
The Bombay Stock Exchange's Sensitive Index, or Sensex, fell 423.35, or 2.4 per cent, to 17,051.14, its biggest drop since Nov. 3. The S&P CNX Nifty Index on the National Stock Exchange lost 2.4 per cent to 5,094.15. The BSE 200 Index retreated 2.4 per cent to 2,157.57.
Housing Development dropped 3.6 per cent to Rs2,437. State Bank of India, the nation's biggest lender by market value, slid 1.7 per cent to Rs2,124.1.
An index of wholesale food articles compiled by the commerce ministry increased 16.81 per cent in the week ended January 9 from a year earlier.
Matter of concern
India's accelerating inflation is a "matter of concern" and the government is keeping a constant watch on prices, Finance Minister Pranab Mukherjee said in New Delhi on Wednesday.
HDFC Bank, the third-biggest lender by market capitalization, lost 2.5 per cent to Rs1,711.65. ICICI Bank, the country's second-biggest lender, slid 2.9 per cent to Rs852.7. Axis Bank, the fourth-largest, dropped 2.1 per cent to Rs1,061.25.
"Inflation is the main worry," said Ajay Argal, who helps manage about $9.2 billion in assets at Birla Sun Life Asset Management Co. in Mumbai.
