Indian shares fell for a third straight session on Wednesday to their lowest closing level in nearly two months as exporters slumped after weak macroeconomic data stoked worries about global economic growth. Losses, however, were limited as cyclical stocks gained after the International Monetary Fund raised its FY15 GDP growth estimate for India to 5.6 percent from 5.4 percent, raising hopes of a much-talked-about cyclical recovery in the domestic economy.
The IMF on Tuesday cut its world growth forecast to 3.3 percent this year from 3.4 percent. Falls in software stocks were accentuated after Citigroup downgraded certain companies including Infosys ahead of its results on Friday. The downgrades, pinned to recent outperformance and valuations in the export-driven sector, sparked concerns that the July-September earnings may fail to impress heightened expectations of investors.
"A large part of today's fall is due to underperformance in the IT sector," said Vinod Nair, head of fundamental research at Geojit BNP Paribas Financial Services Ltd. Performance in the near term will depend on second-quarter earnings, which are likely to improve by 15 percent year-on-year compared with a high growth of 26 percent in the first quarter, as the rupee is weaker, Nair added.
Investors were cautious ahead of the minutes of the US Federal Reserve's last policy meet due later in the day. The benchmark BSE index fell 0.1 percent, or 25.18 points, to 26,246.79, while the broader NSE index dropped 0.12 percent, or 9.70 points, to 7,842.70. Both the indexes marked their second consecutive close below the 50-day moving average and lowest close since August 14.
Exporters led losses. Infosys fell 1.2 percent after Citigroup downgraded the stock to "neutral" from "buy", saying "positives are adequately discounted." Tech Mahindra fell 4.7 percent after Citigroup cut its rating to "sell" from "neutral", while MindTree lost 4 percent after a downgrade to "sell" from "buy". Among other IT stocks, Tata Consultancy services lost 1.8 percent and Wipro ended down 4 percent. Sun Pharmaceutical Industries fell 4.2 percent, Dr Reddy's Laboratories lost 4.3 percent and Cipla ended down 2.8 percent. Jubilant Foodworks fell 1.2 percent after rival Yum Brands Inc cut its 2014 earnings forecast on Tuesday.
Sobha Developers lost 2.9 percent after the company on Tuesday said its September-quarter sales were valued at 5.59 billion rupees, raising worries the company may not able to meet its full-year guidance, traders said. Domestic cyclical stocks gained after IMF raised India's growth outlook for FY15. State Bank of India gained 1.9 percent, Larsen & Toubro rose 2.3 percent and auto maker Mahindra & Mahindra advanced 1.1 percent.
Oil companies surged after Brent fell to a 27-month low on concerns about global growth and oil glut. Hindustan Petroleum Corp surged 5.6 percent, Indian Oil Corp jumped 6.9 percent and Bharat Petroleum Corp advanced 3.7 percent. Among explorers, Oil and Natural Gas Corp gained 2.4 percent, while Oil India rose 1.2 percent.
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