Indian shares fell 0.5 percent on Tuesday to their lowest close in nearly six weeks, but Reliance Communications rose on hopes the mobile operator would not overpay for a deal with South Africa's MTN. Traders said the market lacked conviction after rising as much as 1 percent during trade and investors were quick to cut positions before the close.
"There is lack of institutional interest in the market and all this uncertainty related to inflation and oil price hike is forcing investors to stay away from the markets," said Gajendra Nagpal, chief executive of Unicon Financials.
Annual inflation topped 8 percent in March for the first time in 3 years, revised data showed on Friday, and analysts said a possible rise in government-set retail fuel prices could push it closer to double digits.
India will take a decision soon on whether to raise petrol and diesel prices, a senior oil ministry official said on Tuesday, as it struggles to ease losses at state oil firms without adding to inflation or alienating voters.
No. 2 mobile operator Reliance Communications rose 1.6 percent to 551.75 rupees on hopes it and MTN Group may swap shares or take big stakes in a new company, without stretching its balance sheet.
The stock had tumbled 5.1 percent on Monday after Reliance and MTN said they had started talks that could create a $66 billion telecoms group, triggering worries about valuations.
The 30-share BSE index ended down 0.45 percent, or 72.91 points, at 16,275.59, its lowest close since April 16, with 14 components falling. The index opened up 0.65 percent and rose as much as 0.97 percent.
The benchmark is down nearly 20 percent in 2008. In the broader market, losers overwhelmed gainers 1,760 to 918 on volume of more than 297 million shares. Reliance Industries, India's top listed firm, fell 1.3 percent to 2,493.20 rupees, its lowest close since April 10. The stock has lost 6.5 percent in the last four days on selling by foreign funds, traders said.
A Merrill Lynch report on Friday said if a tax holiday is withdrawn for oil and gas production it would be negative for Reliance's earnings. Industry officials say the new tax regime appears to give a tax break for oil discoveries but not for gas.
Financials such as ICICI Bank fell 1.7 percent to 812.55 rupees, its lowest close since April 15, and State Bank of India lost 4.2 percent to 1,473.30 rupees on concerns about monetary policy tightening to rein in inflation. The sector index dropped 2.3 percent.
Tata Consultancy Services Ltd rose 0.8 percent to 966.60 rupees after the top software services exporter said it had signed a five-year deal worth $100 million with privately held European firm NXP Semiconductors. The 50-share NSE index fell 0.31 percent to 4,859.80, its lowest close since April 11.
Elsewhere in the region, Karachi's 100-share index rose 1.89 percent to 12,822.25, after the central bank agreed to defer a proposal to cap banks' exposure to the capital market and helped stocks recover from a more than eight-month low set the previous day. Colombo's All-share index ended down 0.51 percent at 2,558.89 points.
STOCKS THAT MOVED: Opto Circuits India Ltd rose 3.6 percent to 344.55 rupees after the medical devices equipment maker's board proposed seven bonus shares for every 10 held.
Chambal Fertilisers & Chemicals rose 6.9 percent to 76.40 rupees and National Fertilisers ended 3.7 percent higher at 47.50 rupees on news India's fertiliser subsidy will more than double in the current year.
MAIN TOP THREE BY VOLUME: Chambal Fertilisers & Chemicals Ltd on 17 million shares.