Indian shares declined for the second day, closing nearly 1 percent lower on Wednesday, with financials leading the fall on concerns their margins could shrink in the near term. Weak world markets also kept the sentiment subdued. Banks have been raising their deposit rates to fend off tight cash conditions, while building inflation pressure is expected to trigger a hawkish monetary stance by the central bank, a move that could douse demand for loans.
The Reserve Bank of India, which had raised rates six times in 2010 before pausing in December, is widely expected to hike key rates at its policy review scheduled for January 25. The 30-share BSE index closed 0.96 percent, or 197.62 points, lower at 20,301.10 points, with 24 of its components closing in the red. The 50-share NSE index declined 1.1 percent to close at 6,079.80 points.
Volume was low with only 308 million shares changing hands on the BSE, where declining shares were nearly double the advancing ones. Leading lenders State Bank of India, ICICI Bank and HDFC Bank shed between 1.3 percent and 3.1 percent. Larsen & Toubro erased early gains and shed 2.1 percent. An Economic Times report said the engineering and construction conglomerate may be split into nine independent companies.
Energy giant Reliance Industries, which has the highest weighting on the main index, slipped 0.3 percent. British oil explorer Hardy Oil and Gas said it abandoned a well in its key D9 exploration licence in India, which is operated by Reliance, after failing to find gas in commercial quantities.