Indian shares fell for a fourth day to a two-week closing low on Wednesday on continued worries after a regional party withdrew from the ruling coalition, and due to lingering doubts about how aggressively the central bank will cut interest rates this year. Lenders such as ICICI Bank Ltd and State Bank of India led the decline, although defensive stocks such as Hindustan Unilever Ltd gained.
Shares fell even after the Indian government said on Wednesday it was still able to pass reform legislation in parliament, which failed to address investor concerns about the prospect of early elections or stalling reforms. The slew of negative developments is raising concerns about foreign investor flows, which had played a critical role in the strong gains in domestic shares last year.
"Political instability causes a great amount of discontinuity which is not conducive for the markets," said Paras Adenwala, Managing Director & Principal Portfolio Manager, Capital Portfolio Advisors. "I am quite concerned about what would happen to all the reforms and bills promised earlier," he added. The benchmark BSE index fell 0.65 percent, or 123.91 points, to 18,884.19, its lowest close since March 4. The broader NSE index fell 0.9 percent, or 51.55 points, to 5,694.40.
Bank shares extended declines after the Reserve Bank of India stuck to a cautious tone on monetary policy, even after cutting interest rates by 25 basis points for the second time this year. ICICI Bank fell 3.01 percent, while Axis Bank dropped 1.7 percent. Shares in both lenders have fallen 9.8 percent and 4 percent each in four sessions, after an independent journalist accused the banks of money laundering practices. State Bank of India shares fell 3.8 percent.
Among other Decliners, Bharti Airtel Ltd shares ended 4.55 percent lower after its chairman was ordered on Tuesday to appear in court in a case over alleged corruption in allocating mobile phone bandwidth more than a decade ago. Shares in Zee Entertainment Enterprises Ltd fell 5.35 percent after Goldman Sachs downgraded the television broadcaster to "neutral" from "buy", saying the stock appeared "fairly valued" given the macro headwinds that could hurt advertisement spending.
Shares in Housing Development and Infrastructure Ltd (HDIL) ended 20 percent lower after local credit agency Credit Analysis and Research Ltd (CARE) downgraded the real estate developer's debt, citing "delays in servicing" obligations. HDIL later said in a statement it had not accepted the rating assigned by CARE. It said it reiterated the company's strong financial and operational performance and sound fundamentals.
Shares in Manappuram Finance Ltd closed 13.5, percent lower, after the company said on Tuesday it expects an "under recovery" of revenue on certain gold loan portfolios due to a correction in gold price. However, broader losses were capped as defensive shares gained. Hindustan Unilever gained 3.34 percent, while Cipla ended 1.6 percent higher.