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Sensex down 1.37%; Tata Group Shares Fall

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The BSE Sensex fell more than 1 per cent in choppy trade on Thursday on mounting concerns of high inflation, slowing growth and faltering local currency, while retailers rallied on hopes the supermarket sector will be opened to foreign firms.

Shares in Tata Steel, Tata Motors and Tata Consultancy Services skidded lower after the salt-to-software conglomerate announced a successor to iconic Chairman Ratan Tata.

The cabinet is set to discuss on Thursday opening the retail sector with a 51 per cent cap on foreign holding, although it may not take a final decision.

Pantaloon Retail (India) Ltd, India's biggest listed retailer, rose 4.6 per cent, while Vishal Retail rallied 6.6 per cent and Shoppers Stop gained 2 per cent.

Currently, India allows foreign retailers to take a maximum 51 per cent stake in single-brand retailers and 100 per cent for wholesale operations, a policy the world's top retailer Wal-Mart and Carrefour among others have lobbied to free up further.

By 11:32 am (0602 GMT), the main 30-share BSE index was down 1.37 per cent at 15,485.55, with all but three of its components trading in red. The benchmark, which hit a two-year low on Wednesday, had opened 0.1 per cent higher.

"Local concerns are there and global concerns are playing an equally important role in today's market. The news from the German bond sale means the European crisis is unlikely to be resolved soon," said R.K. Gupta, managing director at Taurus Asset Management.

Asian stocks were subdued and the euro fell to a six-week low against the yen on Thursday after an unsuccessful German bond sale raised alarm that Europe's ever-worsening sovereign debt crisis is starting to affect even the continent's economic powerhouse.

"Also, it seems like FIIs (foreign institutional investors)are losing confidence in the India growth story," Gupta said.

The main index is down more than 24 per cent this year to be among the world's worst-performing equity markets.

Shares in Tata Steel fell 3.4 per cent, while top software exporter Tata Consultancy Services and vehicle maker Tata Motors were down more than 1 per cent each.

Tata Group, India's biggest corporate house, said on Wednesday Cyrus Mistry would succeed Ratan Tata when he retires in December 2012, ending a global search that lasted more than a year. Mistry, whose father is the biggest shareholder in the Tata Sons holding company, has big shoes to fill in succeeding Ratan Tata.

Energy major Reliance Industries, India's most-valuable firm and the heaviest stock in the main index, fell 1.3 per cent, while software bellwether Infosys Ltd was down 1.2 per cent.

Infosys Chief Executive S.D. Shibulal said on Wednesday the No 2 Indian software services exporter expects its fiscal third-quarter sales close to the low end of its forecast as customers delay decisions on large contracts amid economic uncertainties.

The 50-share NSE index was down 1.30 per cent at 4,645.55. In the broader market, there were more than two losers for every gainer on volume of about 236 million shares.

Traders said the market would remain volatile on Thursday due to the expiry of monthly derivative contracts later in the day.

The rupee, which has slumped more than 14.5 per cent this year due to a swelling current deficit and dwindling inflows, was trading higher on suspected central bank intervention and corporate dollar sales.

The currency, Asia's worst performer this year, hit a record low on Tuesday and is vulnerable to portfolio outflows if the euro zone crisis and US debt woes dampen global risk appetite.

On The Move

  • SKS Microfinance reversed early gains of 5 per cent and were down 1.3 per cent at 113.95 rupees. The microlender said on Wednesday its founder Vikram Akula resigned as chairman and named an independent director as an interim replacement.

  • Thomas Cook India was down 0.3 per cent at 37.75 rupees. The tour operator said its operations would not be affected by the financial troubles of its British parent.

Top 3 By Volume

  • Suzlon Energy on 16.3 million shares

  • Shree Renuka Sugars on 9.6 million shares

  • Unitech Ltd on 7.7 million shares