Indian shares fell sharply on Friday, weighed down by tepid global cues and rupee weakness amid worries about slowing domestic growth. A number of investment banks cut India's FY13 GDP growth estimates after data yesterday showed India's economic growth had slowed to 5.3 percent in the January-March quarter, the lowest in nine years.
The Reserve Bank cannot arrest the rupee's decline if it is caused due to weak fundamentals of the economy or global factors, media reports quoted RBI deputy governor KC Chakrabarty as saying, raising concerns about the rupee's outlook at a time of intense global risk aversion. The rupee was last trading higher at 55.89-55.90 per dollar, reportedly due to dollar selling from two large foreign banks.
With the government blaming global troubles for slower growth and the rupee showing further signs of weakness after some temporary reprieve recently, investors are clueless on whether they can go bargain hunting.
However, continued concerns over Europe's debt crisis and the U.S. economic recovery notwithstanding, there is speculation that falling commodity prices, especially the plunge in crude prices to a seven-month low overnight, will ease inflation figures significantly in the coming months, potentially brightening prospects for interest rate cuts.
Extending overnight losses, Brent crude fell nearly 2 percent below $100 a barrel for the first time since October and U.S. crude futures were down to $85 a barrel, weighed down by weak U.S. and Chinese data and a government report showing bloated U.S. stockpiles. Also, euro zone unemployment reached the highest on record at 11 percent in April and March, the EU's statistics office Eurostat said today, intensifying concerns that slower global growth will curb fuel demand.
The benchmark 30-share Sensex saw a free fall, ending down 253 points or 1.56 percent near the day's lows at 15,965, with 27 of its components retreating. Upstream oil firm Gail India bucked the downward trend to end 2.7 percent higher, while diversified business conglomerate ITC rose 1.5 percent and drugmaker Sun Pharma edged up 0.2 percent.
The broader Nifty index fell by 83 points or 1.68 percent to 4,842, while the BSE mid-cap and small-cap indexes retreated 1.5 percent and 1.2 percent, respectively.
Tech shares bore the brunt of the selling, as a slew of U.S. economic indicators pointed to recovery losing momentum in the world's largest economy. TCS fell 1.7 percent, Infosys lost 2.1 percent and Wipro shed 1.8 percent.
Banks followed suit after rising early in the session on rate cut hopes. State-run lender SBI fell 1.4 percent, while private-sector lender ICICI Bank eased 0.3 percent and HDFC Bank tumbled 2.9 percent.
Shares of Tata Motors, India's largest automaker, fell 3.7 percent after the firm reported a modest 4 percent rise in May sales, in line with expectations. Maruti Suzuki, which posted a 5 percent drop in monthly sales, fell 2.9 percent and Mahindra & Mahindra lost a percent after reporting flat tractor sales.
Among other blue-chip companies, shares of energy giant Reliance Industries, copper producer Sterlite Industries, state-run oil explorer ONGC and engineering & construction company Larsen & Toubro fell about 3 percent each.
CRISIL rose 0.3 percent after announcing an acquisition. Indraprastha Gas soared 29 percent after the Delhi High Court ruled in favor of the company that the industry regulator Petroleum and Natural Gas Regulatory Board does not have the authority to fix tariffs.
Elsewhere across Asia, only China's Shanghai Composite bucked the downtrend to end marginally higher on hopes for fresh stimulus after data showed China's manufacturing weakened in May. Other key benchmark indexes in Australia, Hong Kong, South Korea and Japan fell between 0.4 percent and 1.2 percent, as weaker-than-expected U.S. as well as Chinese data exposed the downside risks facing the global economy.
The data came ahead of the closely watched U.S. employment report for May due later in the day, which could offer further clues about the state of the U.S. economy.
The major European averages such as the German DAX, France's CAC 40 and the U.K.'s FTSE 100 were down between 0.8 percent and 2 percent as final estimates released by Markit Economics confirmed the deterioration in the eurozone's manufacturing activity in May.
by RTT Staff Writer
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