Indian shares shed 1.8 percent on Monday, taking their losses to more than 7 percent over five straight sessions, after Standard & Poor's downgrade of the US sovereign debt rating triggered a flight from risky assets in global stock markets. Indian policymakers tried to calm the jittery markets, saying growth story in Asia's third-largest economy remained strong despite the global economic uncertainty, which helped the domestic market erase some of its losses.
But in an indication the global equities rout is unlikely to abate soon, S&P 500 futures were trading 2.4 percent lower by 1003 GMT, indicating a lower opening for the Wall Street on Monday. Shares in leading software exporters Infosys and Tata Consultancy were among the biggest losers in the market on fears that demand from the United States, the sector's biggest market, will slow down amid the economic uncertainty.
"If the global economic situation worsens then there will be a flight to safety and money will be pulled out from all the markets including India," said Dipen Shah, head of private client research group at Kotak Securities. Ratings agency Standard & Poor's cut the US long-term rating by one notch from AAA on Friday, capping a week that saw $2.5 trillion wiped off companies' values amid worries the US economy was stalling.
The benchmark 30-share BSE index closed down 1.82 percent, or 315.69 points, at 16,990.18, closing below the 17,000-mark for the first time in nearly 14 months, with all but six of its components closing in the red. The BSE index, which dropped as much as 3.2 percent during trade, is down more than 17 percent this year making it one of the worst global performers this year. It has lost 7.2 percent in the last five trading sessions.
The 50-share NSE index ended down 1.8 percent at 5,118.50 points. In the broader market, losers were ahead of gainers in the ratio of 4.7:1 on the NSE, on relatively high volume of 742 million shares.
Gold price was set for its second largest daily gain this year on Monday after the respective pledges by the G7 and the European Central Bank to quell the turbulence in the financial markets did nothing to put investors at ease. In a move to calm nervous investors, Finance Minister Pranab Mukherjee said India was in a better position than other countries to manage the impact of an uncertain global economic situation.
Goldman Sachs on Monday upgraded India to "market weight" from "underweight," citing a likely turn in the macro cycle, lower oil prices, lower valuation, and policy reform.
Shares in Infosys, India's No 2 software exporter, was the top loser in the index, falling 4.7 percent to 2,470.50 rupees, their lowest closing level since February last year, on worries global firms may cut back on IT services in a weak economy. Larsen & Toubro dropped 0.5 percent to 1,631.25 rupees, after Indian engineering conglomerate beat estimates in its quarterly net profit but said margins in this fiscal year could fall by up to 75 basis points.
Mahindra & Mahindra rose 2.3 percent to 668.25 rupees after India's largest utility vehicles maker reported a better-than-expected 8 percent rise in quarterly net profit, driven by strong volume and demand growth. Index heavyweight Reliance Industries' shares fell 1.4 percent to 780.65 rupees.