MUMBAI: Indian shares ended lower on Thursday, extending their losses to 3.5 percent over three days, with investors shunning risky assets on worries about the impact of high interest rates on company earnings and tracking a sell-off in overseas markets.
Global stocks fell to their lowest in more than a week on Thursday, as U.S. politicians struggle to come to an agreement over the debt ceiling days before a deadline to avoid default.
Shares in index heavyweightReliance Industries and financials, including biggest lenderState Bank of India
and third-largest lenderHDFC Bank , led the losses.
But shares in India's top cigarette makerITC , in which British American Tobacco owns 31.7 percent, rose 2.7 percent to 206.25 rupees after the firm posted a 25 percent rise in its fiscal first-quarter net profit.
The benchmark 30-shareBSE index closed down 1.21 percent, or 222.73 points, at 18,209.52, its lowest closing level in more than a month. Twenty-four of its components closed in the negative zone.
The index, which dropped as much as 1.3 percent during trade, is down more than 11 percent so far this year, making it one of the worst global performers.
"Global concerns are definitely keeping people away from taking a big call on the market and we are also seeing a moderation of corporate earnings growth rates," said Kaushik Dani, a fund manager with Peerless Mutual Fund.
"The hardening of the interest rates will clearly manifest in the financial performance of companies."
Finance Minister Pranab Mukherjee warned on Wednesday of more interest rate increases, a day after the country's central bank shocked markets by lifting rates by a hefty 50 basis points.
The Reserve Bank of India has raised rates 11 times since March 2010 to fight nearly double-digit inflation. Rising borrowing costs have a bearing on corporate profit margins and could slow the pace of economic expansion.
Expectations for interest rate increases in India for the remainder of this year have jumped by 50 basis points after the central bank raised policy rates, a Reuters snap poll found on Tuesday.
State Bank of India fell 2 percent to 2,356.60 rupees, HDFC Bank closed 2.9 percent lower at 487.30 rupees and top mortgage lender HDFC shed 2.1 percent to 688.35 rupees amid growing concerns about a slowdown in loan demand.
Analysts said investor sentiment was also impacted by below normal monsoon rains, critical to India's trillion-dollar economy. Rains were 23 percent below normal in the week to July 27, the weather office said on Thursday.
Reliance Industries lost 2.7 percent to 837.35 rupees, taking its losses to 5.2 percent since it posted quarterly earning on Monday. The company reported record quarterly profit but slowing gas production has clouded its outlook.
Infosys, the country's second-biggest software exporter, ended down 1.6 percent at 2,751.10 rupees, while bigger rivalTata Consultancy fell 1.5 percent to 1,129.55 rupees on worries about outsourcing demand in their main U.S. market.
Top carmaker Maruti Suzuki closed 1.9 percent lower at 1,185.90 rupees, after a spokesman for the company said workers went on strike at its plant in the northern state of Haryana, halting production on Thursday.
Hindustan Unilever dropped nearly 1 percent to 322.85 rupees on concerns about slackening volume growth and leaner margins at India's largest household products and consumer goods maker.
The 50-shareNSE index fell 1.06 percent to 5,487.75 points. There were nearly three losers for every gainer on the National Stock Exchange, with total volume of about 843 million shares.
World shares as measured by MSCI were down 0.6 percent, while the MSCI index of Asia Pacific stocks outside Japan was down 0.9 percent, with technology, commodity-related and consumer shares the biggest drags.
STOCKS ON THE MOVE
State-run oil explorer Oil and Natural Gas Corp ended up 0.3 percent at 277.20 rupees ahead of its fiscal first quarter results. The company is expected to report a 16.4 percent rise in June-quarter net profit.
SKS Microfinance dropped 9.9 percent to 432.40 rupees, extending Wednesday's more than 8 percent loss. SKS, India's largest and only listed microfinance company, on Tuesday reported a net loss for the June quarter.
MRF fell 3.5 percent to 7,101.95 rupees after India's No.2 tyre maker by market capitalisation, on Thursday said quarterly profit almost halved as higher raw material costs, especially of rubber, pinched its margins.
Sensex falls further by 1.21% on interest hike, global trend
CA ADITYA SHARMA (CA IN PRACTICE ) (16719 Points)
28 July 2011
CAclubindia
