Indian shares tumbled 2.4 percent to six-week closing lows on Monday, led by financials, on rate increase jitters and fund inflow slow down fears, with quarterly earnings which begin this week eyed for more cues. The benchmark index fell for the fifth straight session, its longest such losing streak since May 2010.
Rate-sensitive sectors were the hardest hit, with the banking, auto, and real estate indexes declining between 2.1 percent and 3.6 percent. The 30-share BSE index shed 2.38 percent or 467.69 points to 19,224.12 points, its lowest close since November 26, 2010. Twenty-eight of its components closed in the red. The 50-share NSE index declined 2.4 percent to 5.762.85 points.
The main index is down 6.3 percent already in 2011, after rising 17.4 percent in 2010, on the back of record foreign fund inflows of $29.3 billion. "Rate hike fears have been bothering of late," said Arun Kejriwal, director of research firm KRIS. A surge in food inflation to 18.38 percent in late December, its highest in more than a year, sparked talks of a hawkish monetary stance by the central bank when it reviews policy on January 25. The central bank governor said late Friday a pause in its tightening cycle should be interpreted as a comma and not a full stop, indicating further monetary policy tightening going ahead.
"Also, there are concerns that FII (foreign institutional investors) inflows may be diverted away from emerging economies to developed ones as they start faring better," said Kejriwal. The US economy may finally be hitting its stride even if growth remains too weak to put a real dent in the nation's jobless rate, Federal Reserve Chairman Ben Bernanke said on Friday. "When those (developed) economies start doing well, why should FIIs look at countries like India in a similar way," Kejriwal added. Top lender State Bank of India shed 2 percent while rivals ICICI Bank and HDFC Bank declined 3.2 percent and 3 percent.
Mortgage lender Housing Development Finance Corp dropped 4.4 percent. Automakers such as Tata Motors, Hero Honda, Maruti Suzuki and Mahindra & Mahindra retreated between nearly 1 percent and 3.7 percent. Second-largest outsourcer Infosys Technologies, which kicks off quarterly earnings season on Thursday, bucked the trend and closed 0.9 percent higher on expectations of robust performance and optimistic guidance.
"While the 6-15 percent run-up in frontline stocks over last one month could restrict near-term upside, we retain our preference for Infosys as a long-range play on renewal deal opportunity theme," Standard Chartered Bank said in a note. Energy giant Reliance Industries, which has the highest weighting on the main index, joined the broader market sell off and closed 3.2 percent lower. Losers were nearly four times the number of gainers in the broader market, while volume continued to be low at 325 million shares, as investors preferred to stay on the sidelines ahead of the December-quarter earnings.