Indian shares eased 0.1 percent on Monday, with banks leading the losses as rising inflation sparked fears the central bank may withdraw more liquidity support soon and raise rates early next year. Investors were, however, comforted after Abu Dhabi bailed out debt-stricken fellow emirate Dubai, sending global stocks higher and weakening the dollar.
Indian wholesale prices rose faster-than-expected 4.78 percent in November, with the food price index soaring an annual 16.71 percent. "There is an inflationary pressure on food items. It is a matter of concern," Finance Minister Pranab Mukherjee said after the data.
Leading lender State Bank of India dropped 0.8 percent while rivals ICICI Bank and HDFC Bank shed 1.5 percent each. The 30-share BSE index closed down 0.13 percent, or 21.48 points, at 17,097.55, after rising as much as 0.9 percent in early trade on the Dubai bailout. Seventeen of its components closed in the red.
Abu Dhabi provided its debt-laden neighbour Dubai a $10 billion lifeline to last its troubled flagship company until the end of April, heading off a bond default on payment day. "The fact that Abu Dhabi has supported Dubai does not mean that the problem is over. Further bad news is not ruled out from Europe," Sanghavi said.
"There is neither excitement, nor pessimism in the market. It is just going through a consolidation phase." The benchmark index has rallied more than 77 percent so far this year, fuelled by foreign buying of stocks. According to data from Nomura, foreign funds have bought $16.5 billion of Indian equities so far this year.
In the broader market, losers outpaced gainers in the ratio of 1.5:1 on relatively low volume of 318 million shares. Software services companies gained on better outlook with Infosys Technologies hitting a record high of 2,519.90 rupees, before ending at 2,498 rupees, up 1.8 percent.
Wipro rose 2.2 percent to 658.75 rupees. Cement companies climbed as demand picked up in western and southern India, analysts said. ACC and Grasim climbed 5.3 percent and 2.8 percent respectively. The 50-share NSE index shed 0.2 percent to 5,105.70.
State-run Bank of Baroda climbed 2.2 percent to 509.90 rupees on the Dubai rescue. The bank had a total loan book exposure of 7-8 percent in the United Arab Emirates. Diversified Aditya Birla Nuvo rose 1.9 percent to 867.95 rupees after the Economic Times reported the company aimed to spin off its financial services business.
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