Indian shares hit a three-and-a-half week low on Monday as concerns that rising oil prices may be a drag on worldwide growth prompted investors to unwind long positions built up over the past few weeks. Besides crippling domestic economic activity, the recent 10 percent rise in oil prices, if sustained,will hinder the RBI's efforts to lower interest rates.
Investors also remain cautious ahead of election results from five states due to be announced on March 6 and the Union budget for 2012-13 fiscal slated to be presented on March 16. Meanwhile, the government will release gross domestic product (GDP) numbers for the third quarter on Wednesday.
Extending losses for a fourth consecutive session, the benchmark 30-share Sensex ended the session down about 480 points or 2.67 percent at 17,446, with 28 of its components retreating. The 50-share Nifty index fell by 148 points or 2.73 percent to 5,281, while the BSE mid-cap and small-cap indexes lost over 3 percent each.
Metal stocks bore the brunt of the selling, with Jindal Steel, Hindalco and Tata Steel falling 5-7 percent. Sterlite lost 2.5 percent and Sesa Goa plunged 10.5 percent after the Vedanta Group announced its much-awaited business restructuring, aimed at cutting costs, increasing cash flows and improving economies of scale for creating the world's seventh largest diversified natural resources major in operating profit terms.
The transaction involves merger of Sterlite into Sesa Goa in the swap ratio of three shares of Sesa Goa for every five existing Sterlite shares.
Banks such as SBI and ICICI Bank fell 4-5 percent as rising oil prices dashed hopes of interest rate cuts in April. Automakers such as Bajaj Auto, Mahindra & Mahindra and Hero MotoCorp lost 3-7 percent, property developer DLF shed 5 percent, power equipment maker BHEL declined 5 percent and market heavyweight Reliance Industries ended 4.8 percent lower.
Among those that bucked the downward trend, diversified business conglomerate ITC rose 1.4 percent and drug maker Sun Pharma gained marginally.
ONGC fell 1.3 percent after the government postponed an empowered group of ministerial meeting to discuss diluting government stake in the oil major. BHEL slumped 4.9 percent despite winning a Rs 774-crore contract from ONGC.
SKS Microfinance hit the 5 percent lower circuit limit amid reports it will raise up to Rs.500 crore via a qualified institutional share placement by the end of this fiscal.
Kingfisher Airlines declined 1.9 percent. Chairman Vijay Mallya said in an interview with a newspaper that the cash-strapped airline is in talks with two foreign carries for a rescue package. Jet Airways, which is struggling for working capital, tumbled almost 6 percent on a brokerage downgrade.
Sintex Industries plummeted 9.4 percent on heavier than normal trading volumes. Gati edged down 0.7 percent on reports of stake sale in its shipping business to a German company.
On the global front, most Asian markets edged lower on Monday and the major European averages were down over a percent each in early trading, as high oil prices threatened a fragile global economic recovery. Sentiment was also dampened by the lack of a confidence-boosting agreement at the G20 summit to support eurozone efforts to bolster bailout capacity.
The G20 top and developing countries said the eurozone will have to put in place a bigger financial firewall to combat the region's debt crisis before other countries contribute to any bailout.
Brent crude prices snapped five days of gains and were last hovering below $124 a barrel. Copper was down 0.8 percent and the euro dropped against the dollar after IMF Managing Director Christine Lagarde said the world economy is "still not of the danger zone" amid fragile financial systems, high debt levels and rising energy prices.
by RTT Staff Writer
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