Sensex, Nifty Tumble On Economic Concerns, Euro Fears
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Ignoring easing of food inflation, the Bombay Stock Exchange benchmark tumbled 389 points. Traders said India's stock market would remain under selling pressure over the next one week on investor caution ahead of a slew of economic data.
After a weak start, the Sensex dropped 388.82 points, or 2.30 per cent to 16,488.24, even as the food inflation fell sharply to 6.60 per cent for week ended November 26, from 8 per cent in the previous week.
On similar lines, the broad-based National Stock Exchange index Nifty fell by 118.95 points, or 2.35 per cent to 4,943.65 led by stocks of capital goods, realty, auto and metal sectors.
Auto sector stocks dropped led by Maruti Suzuki, Mahindra and Mahindra and Tata Motors on reports of slow expansion of the sector.
Marketmen said there were doubts among investors that the EU summit on Friday will be able to tackle the region's debt problems.
They also said that the brokerage firm CLSA lowering 12-month target for the benchmark, citing earning cuts further kept the market under pressure.
The Sensex heavyweight Reliance Industries dropped 3.71 per cent and second-heaviest Infosys lost 1.06 per cent to Rs 2,723.75. The two carry over 20 per cent weight on the Sensex.
"The market will be quite volatile for the whole week starting today. There will be pressure on the downside," said R.K. Gupta, managing director of Taurus Asset Management.
"The market is playing in a very cautious zone and people would not like to take long positions because there are a lot of important issues coming up in the next five to six trading sessions," Gupta said.
India's industrial output and inflation data are due next week, while the RBI will review monetary policy on December 16.
The 30-share BSE index closed down 2.3 per cent -- its biggest single-day fall since November 21 -- at 16,488.24 points, after losing as much as 2.7 per cent. All but five of its components were in the red.
The benchmark, which is one of the world's worst performers this year, has fallen 19.6 percent since the start of the year.
Brokerage CLSA on Thursday lowered its 12-month target for the benchmark to 17,000 from 18,200, citing earnings cuts for the current fiscal year ending March and the next year.
Automakers were among the big losers after an industry body said they may just break even this year and warned it would cut its sales outlook.
Tata Motors , Maruti Suzuki and Mahindra & Mahindra shed 1.3 to 3.6 per cent, pulling the BSE auto index down 1.6 per cent.
Rising finance costs and increasing prices have deterred buyers in Asia's third-largest economy in recent months, with car sales in April-November down 3.5 percent from the same period a year ago.
Worsening government finances and an announcement on Wednesday by the finance minister to suspend a policy decision to open the supermarket sector to foreign giants due to political opposition also hurt investor sentiment, traders said.
Top listed retailer Pantaloon Retail , which has been hoping to tie up with foreign giants, fell 5.8 percent after the government on Wednesday suspended plans to open its $450 billion supermarket sector to foreign firms.
Other retailers such as Vishal Retail and Shoppers Stop Ltd fell 6.2 per cent and 1.36 per cent.
Data showing India's annual food inflation slowed was offset by concerns the industrial output had declined for the month of October, said Ambareesh Baliga, chief operating officer at brokerage Way2Wealth Securities.
Doubts about whether a European Union summit on Friday would be able to tackle the region's debt problems also kept investors wary because the crisis could trigger foreign fund withdrawals from emerging markets such as India, dealers said.
Telecom stocks took a hit after downgrades on ratings of bluechip stocks in the sector.
Credit Suisse downgraded telecom giant Bharti Airtel to "neutral" from "outperform" and smaller peer Idea Cellular to "underperform" from "buy" as regulatory risks had not been priced in.
India's telecoms market, the second-largest in the world after China, has struggled in recent years due to ferocious competition and a massive graft scandal, prompting authorities to overhaul the decade-old industry regulations.
Bharti and Idea fell 2.7 per cent and 4.16 per cent, respectively.
Infosys Ltd fell 1.3 per cent after Bank of America Merrill Lynch downgraded the stock to "neutral" from "buy," partly on greater exposure to discretionary IT spending.
The broader 50-share NSE index ended down 2.35 per cent at 4,943.65 points. In the broader market, there were 3.6 losers for every gainer with 592.7 million shares changing hands.
The MSCI's measure of Asian markets other than Japan was down 0.75 per cent.
Capital goods giants BHEL and Larsen & Toubro fell 5.7 per cent and 5.4 per cent, respectively after Barclays Capital said the sector was undergoing a cyclical deceleration in orders and earnings.
Crompton Greaves fell 3.6 per cent after Morgan Stanley started coverage on the stock with an "underweight" rating and said it expects the firm's earnings to be under pressure for the next 12-18 months.
Piramal Healthcare rose 3.6 per cent after the managing director of its unit told Reuters the company was expecting to sell its investments in two real estate projects with an estimated 20 per cent internal rate of return.