Indian shares resumed a falling trend on Monday, with investors worried about the impact of near record crude oil prices on growth and demand. Federal bonds also eased, with sentiment weighed down by rising crude oil prices, which dealers expect would rekindle inflationary pressures in the economy. The 30-share Mumbai Stock Exchange index fell 0.65 percent to 6,656.69 points, led by automobile stocks. The index ended lower after gains of a half percent in opening deals, following a higher close on Friday after five straight days of losses.
Benchmark US light crude was quoted at $56.87 a barrel, not far off the record high of $57.60 hit last Thursday.
"Liquidity is out of the system on account of public share offers and advance tax collections. In addition, growing concerns over high oil prices have led to the market softening," said Vivek Mahajan, assistant vice-president at IL&FS Investsmart Ltd.
High oil prices have left analysts worried, especially with the government expected to raise administered prices of gasoline and diesel, which will raise input costs for all economic sectors.
Shares of automobile makers, which have seen strong sales growth as incomes rose and credit costs fell over the past two years, slipped amid concerns about profits.
Maruti Udyog Ltd was down 4.37 percent at 428.45 rupees, while shares of Tata Motors Ltd fell 2.35 percent to 450.35 rupees.
Mahajan said the drop in foreign fund investments and the approach of the financial year-end on March 31 were also keeping trading volumes subdued.
Foreign funds slowed investments in local shares after robust purchases earlier this month. They had bought $14.7 million worth of shares on Thursday, after selling $56.1 million in the preceding two sessions, latest data showed.
Their net investments in March, however, were robust at $1.85 billion, taking the total this year to $3.91 billion, compared with $8.5 billion through 2004.
Bonds weakened amid fears of inflation and an expected slew of fresh issuances starting next month. The yield on the 10-year benchmark bond finished at 6.7064 percent, after rising 10 basis points last week to end at 6.6605 percent.