Indian shares slid for the eighth straight session, their longest losing spell in at least two-and-a-half years, closing 0.4 percent lower on Wednesday as investors braced themselves for more aggressive actions by the central bank after a hefty interest rate increase.
High fuel and commodity prices will keep India's troublesome inflation levels elevated, while the Reserve Bank of India will raise interest rates more aggressively than economists expected just three months ago, a Reuters poll showed. India's central bank raised interest rates by a sharper-than-expected 50 basis points on Tuesday and said fighting inflation was its top priority, even at the expense of short-term growth.
The world's second-fastest growing major economy will find it "tough" to grow at 9 percent in the current fiscal year if crude prices remain high, Kaushik Basu, the finance ministry's chief economic adviser told Reuters. Financials closed mixed, while IT companies declined on worries over peer Cognisant Technology Solutions Corp's slowing growth rate.
Top motorcycle maker Hero Honda dropped 3.5 percent after it posted a 16.5 percent fall in quarterly profit, its fourth consecutive quarterly decline, due to higher advertising spend during the cricket World Cup and rising input costs. The 30-share BSE index dropped 0.35 percent, or 65.33 points, to 18,469.36 points, with 19 of its components losing ground.
"At current levels, most negatives - other than a likely fuel price hike, if it happens - are in the price," said Arun Kejriwal, director of research firm KRIS. The 50-share NSE index, or Nifty, slipped half a percent to 5,537.15. Two shares fell for each that gained on a volume of 567 million shares on the NSE, lower than the 90-day average daily volume of 645 million shares. Foreign funds have been net buyers of more than $3 billion of Indian stocks since the start of March.
However, they have sold Indian equities in five out of the last six sessions to May 2, leading to concerns they were cautious about investing in Indian stocks, and that this could turn into a short-term trend. Mortgage lender Housing Development Finance Corp and top private lender ICICI Bank slid 3.2 percent and nearly 1 percent, respectively. Leading lender State Bank of India and private lender HDFC Bank gained 1.2 percent each.
Leading software companies Tata Consultancy Services and Infosys Technologies and Wipro declined 0.1 percent and 1.4 percent, respectively.
Oil and Natural Gas Corp advanced 5.3 percent after Bloomberg reported the energy explorer is in talks to acquire oil sands reserves in Canada and may increase its investments in Kazakhstan to help offset declining production. An ONGC spokeswoman could not be reached for a comment by Reuters. Auto stocks suffered a double whammy as they digested the interest rate increase, while already grappling with slowing sales growth. Tata Motors, Maruti Suzuki, Bajaj Auto and Mahindra & Mahindra declined between 0.3 percent and 4.7 percent.
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