Indian shares fell sharply on Monday on apprehensions whether the government will rein in spending and bring down fiscal deficit to 5.1 percent as announced in this year's Budget.
Also weighing on sentiment to some extent, government data released today indicated an acceleration in price levels in February, with the headline retail index based on the Consumer Price Index rising to 8.83 percent from 7.65 percent in the previous month.
High dependence on corporate tax revenue to rein in a bloated deficit and vulnerability to commodity prices and exchange rates weakens the government's credit profile, credit rating agency Moody's said in a statement.
Meanwhile, underscoring the nature of political instability at the Centre, Prime Minister Manmohan Singh today informed Parliament that he has accepted Railway Minister Dinesh Trivedi's resignation and forwarded the same to the President with a recommendation to accept it.
The benchmark 30-share Sensex ended the day down 193 points or 1.1 percent at 17,273, while the 50-share Nifty index fell by 61 points or 1.14 percent to 5,257. Second-line stocks reversed early losses, with the BSE mid-cap and small-cap indexes ending down about a percent each.
Lenders such as ICICI Bank, HDFC Bank and SBI lost 1-3 percent, realtor DLF fell 1.7 percent and mortgage lender HDFC shed 2.2 percent as high consumer price inflation and the recent spike in crude prices dashed hopes of an interest rate cut in the near term.
Union Bank of India fell 2.7 percent after Moody's Investors Service downgraded its ratings by one notch, citing weak asset quality and insufficient loss-absorption.
Tata Consultancy Services, India's largest software services exporter, tumbled almost 4 percent on worries over lower fourth-quarter earnings. Infosys fell 1.2 percent and Wipro edged down 0.3 percent as the Indian rupee rose further in early trading on Monday, boosted by strong capital inflows into federal and corporate debt.
Energy giant Reliance Industries lost 2.2 percent on worries over falling gas output at its KG-D6 fields. State-run oil explorer ONGC slipped 0.2 percent, extending Friday's loss, after the government raised the cess on crude petroleum oil produced in India from 2500 per metric tonne to 4500 per metric tonne.
Auto major Tata Motors fell 1.1 percent after the nation's largest automaker hiked passenger vehicle prices by up to Rs 35,000 with immediate effect. Power-equipment major BHEL plunged 4.8 percent, power producer Tata Power plummeted 3 percent, state-run miner Coal India lost 2.2 percent, engineering & construction giant Larsen & Toubro fell 1.8 percent, steelmaker Tata Steel declined 1.4 percent and carmaker Maruti Suzuki ended down 0.8 percent.
Tractor maker Mahindra & Mahindra rose 1.7 percent and VST Tillers & Tractors rallied 4.8 percent after finance minister Pranab Mukherjee on Friday announced Rs 1,00,000 lakh crore increase in the agriculture credit target to Rs 5,75000 for the fiscal year 2012-13.
Atlas Cycle Industries soared 7.7 percent after the Union Budget proposed to hike customs duty on imported bicycles. Indian Depository Receipts of Standard Chartered Plc soared 6.3 percent, extending gains for a second day in a row after the Union Budget proposed to allow two-way fungibility to encourage foreign investors.
Shares of FMCG players like Hindustan Unilever and ITC rose 1-2 percent and drugmaker Sun Pharma gained 1.7 percent, while aluminum maker Hindalco and Jindal Steel rose around half a percent each.
On the global front, other Asian markets ended on a mixed note and European stocks fell from 8-month highs in early trading as lower-than-expected consumer-sentiment and industrial-production data from the United States tempered optimism about growth in the world's largest economy. While signs of growing stability in the euro zone helped eased sovereign debt worries, investors are sitting on the sidelines awaiting a string of U.S. housing data later in the week for further clarity on global growth outlook.
Measures taken to fight financial woes in Europe and the U.S. are starting to pay off, but the optimism must not lull us into a false sense of security, chief of the International Monetary Fund Christine Lagarde warned Sunday.
Crude futures erased early gains, copper eased and the yen reversed early losses against the euro and dollar as investors sought further evidence of economic recovery before investing additional money into riskier assets. Investors also eye New York Federal Reserve president William Dudley's speech tonight and Fed chairman Ben Bernanke tomorrow for further clues about the course of U.S. monetary policy.
by RTT Staff Writer
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