Indian shares fell modestly on Monday although June inflation numbers added to pressure on the Reserve Bank of India to cut rates at the forthcoming monetary policy review on July 31. India's headline inflation unexpectedly slowed to its lowest level in five months in June, mainly driven by lower prices of fuel and manufacturing items, data released by the Commerce Ministry revealed.
However, at 7.25 percent, the inflation is still way above the Reserve Bank of India's 6 percent target. Inflation for April has been revised to 7.5 percent as against the provisional 7.23 percent earlier. Economists expected the inflation to average 7.6 percent. The decline is likely to continue with improvement in food supply situation, the Finance Ministry said.
The Indian rupee gave up its early gains after opening at over one-week high against the dollar, weighing on investor sentiment to some extent.
Also, with the presidential election nearing its final, investors are pinning hopes that the government will soon kick-start key economic reforms to lift growth and revive risk sentiment, hit by the contentious tax proposals in the Union Budget, including retrospective amendment of the I-T Act which requires Vodafone to pay Rs. 20,000 crore in taxes and interest.
The benchmark 30-share Sensex moved both ways before ending the session near the day's low at 17,103, down 110 points or 0.64 percent from its previous close, while the broader Nifty index fell by 30 points or 0.57 percent to 5,197. IT, metal and realty stocks led the decliners, while healthcare and consumer durable stocks saw stock-specific buying, helping limit the downside to a certain extent.
HDFC Bank slid 0.7 percent after Kotak Institutional Equities downgraded its rating on the stock to 'reduce' from 'add.' Rival ICICI Bank also fell 0.7 percent, but state-run lender SBI rose 0.7 percent and mortgage lender HDFC added half a percent.
Infosys fell 2.5 percent, extending declines for the third consecutive session post its Q1 results. TCS tumbled 3.2 percent, Wipro lost a percent and HCL Technologies edged down 0.4 percent. Shares of MindTree fell 2.2 percent despite the company reporting a better-than-expected 29 percent jump in first-quarter net profit.
Metal stocks lost heavily after Chinese Premier Wen Jiabao warned that the country's economic rebound was not yet stable and economic hardship may persist for a while. Coal India, Hindalco, Sterlite Industries, Sesa Goa, JSW Steel and Jindal Steel fell 1-3 percent. Tata Steel and diversified business conglomerate Century Textiles tumbled about 4 percent each on going ex-dividend.
In the FMCG sector, ITC and Hindustan Lever fell about half a percent each after Union Agriculture Minister Sharad Pawar said the weak monsoon is posing a challenge for sustaining record food grain production this year.
According to prime minister's economic advisor C. Rangarajan, India's FY13 GDP growth target of close to 7 percent is achievable if the monsoon turns out to be normal. The RBI will have to take several factors into account, including the erratic monsoon and the future prospects of inflation before deciding on policy, he told CNBC TV-18.
Tata Motors fell 2.6 percent after it reported a 6 percent rise in global vehicle sales in June. Utility vehicles manufacturer Mahindra & Mahindra eased 0.3 percent and two-wheeler Bajaj Auto slid 0.9 percent, while Maruti Suzuki rose 1.6 percent and Hero MotoCorp gained 0.4 percent.
State-run oil firms ended mixed, with HPCL down 1.9 percent, while BPCL and ONGC posted modest gains, as investors waited for government move over diesel price hike post the presidential elections. Kingfisher Airlines slumped about 4 percent on reports of pilot unrest over the payment of salary dues.
On the global front, other Asian markets closed on a mixed note, as positive sentiment following strong earnings from JPMorgan Chase & Co and Wells Fargo & Co tempered concerns about an impending Chinese economic slowdown. China's Shanghai Composite index tumbled 1.7 percent to end at a more than three-year low on growth concerns.
European stocks fluctuated gains and losses ahead of a few key U.S. earnings and economic reports. Investors also await fresh directional cues from Fed Chairman Ben Bernanke's congressional testimony on July 17 and 18.
by RTT Staff Writer
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