Indian shares fell modestly on Monday, erasing early gains as the Reserve Bank of India's measures to prop up capital inflows failed to meet heightened expectations. In a bid to check rupee volatility, the RBI today hiked the limit of external commercial borrowings by $10 billion to $40bn and also enhanced the limit of overseas investment in government bonds by $5 billion to $20 billion.
Along with the hike in investment limit in government bonds, the central bank widened the non-resident base to include sovereign wealth funds, multilateral agencies, endowment funds, insurance funds, pension funds and foreign central banks.
Market participants expressed disappointment over the measures to boost a sagging economy, saying the measures wouldn't have a material bearing on the Indian rupee in the long term. Investors had expected bolder measures such as an increase in interest rates for deposits of Non-Resident Indians and a bond issue on the lines of the Resurgent India bond issue in 1998 to attract capital inflows.
The embattled rupee trimmed early gains and investors turned their focus to the upcoming European summit later this week, offsetting positive news from Moody's that it was maintaining a stable outlook on India's sovereign credit rating despite challenges such as slowdown in GDP growth rate, weak fiscal performance, inflationary trends and an uncertain investment policy environment.
The benchmark BSE Sensex rose about 160 points early in the session before reversing direction and ending down about 90 points or half a percent at 16,882, with 22 of its component retreating.
Hero MotoCorp, Hindalco, ONGC, Cipla, SBI, BHEL, TCS, HDFC Bank, Jindal Steel, Mahindra & Mahindra and Tata Steel were among the prominent decliners in the Sensex pack, with losses 1-3 percent.
The broader Nifty index fell by 31 points or 0.61 percent to 5,114, while the BSE mid-cap index ended little changed and the small-cap index rose 0.2 percent.
Sterlite Industries slipped half a percent, while Sesa Goa rose 0.8 percent after shareholders of both companies approved the proposed merger of the companies. Engineering & construction giant Larsen & Toubro fell half a percent following reports that it is seeking to sell stake in its infrastructure arm.
Indian Hotels Company lost 1.7 percent after its board approved the allotment of 4.80 crore equity shares worth Rs 497.47 crore to Tata Sons, the promoter of Tata group companies.
Energy giant Reliance Industries gained 0.7 percent after a Moody's report said the likely increase in gas prices will more than compensate for its lower-than-anticipated production at the KG-D6 gas block.
Maruti Suzuki India added 1.1 percent. The Mint reported that the nation's biggest car maker has accelerated work at its Gurgaon factory to introduce a fuel-efficient and technologically superior 800cc car around Diwali.
HCC advanced 1.3 percent on a ET report that bankers have agreed to give an additional loan of Rs 1500 crore to the company, provided key promoters infuse Rs 302 crore.
Elsewhere across Asia, key benchmark indexes in Australia, Hong Kong, Japan, South Korea and China fell between half a percent and 1.6 percent, as investors grew cautious ahead of the upcoming European Union summit on Thursday and Friday where Greek leaders will attempt to re-negotiate the terms of an international bailout agreement.
The euro fell against the dollar and European stocks retreated sharply, extending declines for a third day, as Spain made a formal request for European Union aid to help clean up its troubled banking sector.
by RTT Staff Writer
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