Tuesday 11 November 2008

India shares drop 6.6 pct on global recession fears


Indian shares fell 6.61 percent on Tuesday, their biggest fall in more than two weeks reversing most of the 8 percent-plus rise of the previous two days as fears of a protracted global recession saw investors pare risk again.

Reliance Industries, India's most valuable firm, fell 7.4 percent to 1,207 rupees, after having risen more than 11 percent over two days, while ICICI Bank ended down 7.8 percent at 434.15 rupees.

The two stocks, which together account for more than 20 percent of the main index, contributed most to the market fall.

Traders said the heavy selling into rallies showed the soft underbelly of the market, which hit a three-year low in October, as slowing economic and corporate profit growth and the broader financial crisis worry investors.

"Fear and panic is still there and investors are rushing to liquidate long positions as soon as the market reverses trend, whatever be the valuations," said D.D. Sharma, vice president at Anand Rathi Securities.

Larsen & Toubro dropped 6.4 percent to 863.85 rupees and Bharat Heavy Electricals fell 9.7 percent to 1,366.70 rupees on concerns a slowing economy would result in fewer orders for capital goods firms, traders said.

The 30-share BSE index plunged 696.47 points to 9,839.69, with all but one component losing ground.

JM Financial Services said investors should use the fall as a buying opportunity, as it expected the main index to rise to 10,800-11,300 in the short term.

The benchmark has lost more than half its value in 2008 to be one of the worst performers in Asia. A key factor in the fall has been foreign fund selling of $12.6 billion worth of stocks this year, after they invested a record $17.4 billion in 2007.

Evidence of a weakening Chinese economy, poor data from Japan and Britain and a grim corporate outlook reinforced fears on Tuesday of a prolonged recession fostered by the worst financial crisis in 80 years.

"Looking at the news flow from the U.S., it seems that the bulls may not get any major respite on a sustained basis," brokerage India Infoline said. "Things are still quite fragile and unstable."

Data on Wednesday is forecast to show India's industrial output grew 4.7 percent in September from a year earlier, but analysts said with major economies on the ropes the months ahead would be tough.

On Monday, Morgan Stanley cut its forecast for Indian economic growth in 2008/09 (April-March) to 5.7 percent from 6.5 percent due to high cost of capital, falling consumer loan growth and reduced demand.

Oil and Natural Gas Corp closed down 8.8 percent at 735.05 rupees, even after the overseas arm of the state-run firm said all conditions for its $2.6 billion bid for Imperial Energy had been met.

In the broader market, 1,772 losers overwhelmed 762 gainers on volume of 323 million shares.

The broader 50-share NSE index fell 6.66 percent to 2,938.65.

Source: Reuters

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