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Indian Shares Join Global Sell-off

Indian shares tumbled on Wednesday, weighed down by capital outflow worries after the rupee tumbled to hit a record low against the dollar, succumbing to growing risk aversion due to the euro zone crisis and amid concerns about India's widening current account and fiscal deficits. The rupee pared early losses after finance minister Pranab Mukherjee said there was no need to panic and the RBI is closely watching currency movements.

Senior BJP leader Murli Manohar Joshi today sought to know what steps the government was taking to tackle the situation, as a falling rupee in the international market raised fears that there could be a repeat of 1991, when India saw a balance-of-payments problem due to which the country had to mortgage gold.

"The crisis in our economy is growing. Are we heading towards 1991," he asked the government in the Lok Sabha during Zero Hour, while expressing doubts over government's claims that India's growth story is intact. Mukherjee attributed the drastic fall in the Sensex to the eurozone crisis and said the government will take austerity measures to ensue fiscal consolidation.

After falling below the psychological 16,000 level for the first time in four months, the benchmark 30-share Sensex ended a tad above the support level at 16,030, down about 300 points or 1.83 percent from its previous close. The broader 50-share Nifty index fell by 84 points or 1.71 percent to 4,858, while the BSE mid-cap and small-cap indexes ended down 0.8 percent and 1.1 percent, respectively.

Shares of Tata Motors plunged 7.3 percent as the nation's largest automaker reported flat global sales for April. Maruti Suzuki fell 1.8 percent and Hero MotoCorp slipped 0.6 percent.

JSW Steel slumped 5.2 percent on allegations of illegal iron ore mining in Karnataka. Other metal stocks such as Coal India, Jindal Steel, Hindalco, Tata Steel, SAIL and NMDC fell 2-5 percent as the commodities sell-off continued amid concerns over future of eurozone and slowing Chinese growth. Media reports suggested that China's biggest four banks barely issued any new yuan loans in the first two weeks of May, intensifying worries over China's economic slowdown.

Telecom major Bharti Airtel fell 1.8 percent on allegations of money laundering, lenders SBI and ICICI Bank lost 2-3 percent, property developer DLF shed 3 percent, software services exporter Wipro tumbled 3.3 percent and mortgage lender HDFC fell 3.7 percent.

Piramal Healthcare lost a percent after the drugmaker said it has agreed to buy U.S.-based healthcare information manager Decision Resources Group for Rs 3,400 crore.

Unitech, India's third largest realty firm by market value, soared 7.8 percent despite reporting a 98 percent slump in fourth-quarter consolidated net profit. BPCL rallied 3.3 percent and Videocon Industries ended up 0.6 percent after partner Anadarko Petroleum Corp reported a new gas find in Mozambique.

Global cues were extremely weak, with key benchmark indexes in Hong Kong and South Korea falling more than 3 percent, as news that Greece will hold a second election in June increased uncertainty over the future of the euro region. Investors fear that a Greek exit from the eurozone, a strong position against austerity measures and a disorderly debt default could lead to fatal consequences and make sovereign debt problems worse.

The consequences of even an orderly exit by Greece from the eurozone poses great risks and the spillover effects are difficult to assess, IMF chief Christine Lagarde said, clouding the global economic outlook.

European shares also saw a broad-based sell-off, but shares came off from their day's lows after data showed the number of Britons claiming jobless benefits sank unexpectedly in April.

Commodities continued to reel under selling pressure and the euro tumbled to a fresh 4-month low against the greenback, as investors priced in a Greek exit from the 17-member euro zone. Italian and Spanish 10-year yields soared as speculation gained ground that Moody's Investors Service will 'significantly' downgrade 21 Spanish banks within a week following a cut of credit ratings on 26 Italian banks on Monday.

by RTT Staff Writer

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