MUMBAI (AFP) — Indian shares plunged 4.3 percent on Friday on record crude oil prices and as inflation, at a 13-year high, maintained its upward surge to stand at 11.42 percent, dealers said.
The benchmark Mumbai 30 share Sensex index fell 619.6 points to 13,802.22, a 13-month low.
"There is not much good news around. As oil prices move upwards, there could be more pressure on equities," said Ved Prakash Chaturvedi, managing director with Tata Mutual fund.
Inflation jumped to 11.42 for the week ended June 14, compared with 11.05 percent for the previous week. The rise was marginally higher than analysts' expectations, and keeps the rate at a more than 13-year high.
Interest-rate sensitive auto, property and banking stocks were the hardest hit.
Several economists expect India's central bank to raise rates further, but this may not occur before the scheduled meeting on July 29.
On Tuesday, the Reserve Bank of India (RBI) raised its repo rate -- the rate at which commercial banks borrow funds from the central bank -- to 8.5 percent from 8.0 percent with immediate effect.
It also announced a two-stage hike of the cash reserve ratio, or the amount of cash banks must hold in reserve, by 25 basis points to 8.50 percent effective July 5, and by another 25 basis points to 8.75 percent on July 19.
"The RBI will further tighten monetary policy this year, but this is unlikely to occur prior to its scheduled meeting," said Sherman Chan, an economist with Moody's subsidiary Economy.com.
"An expected slowdown in lending will see business activity moderate, which will in turn weigh on employment conditions," he said in a note to clients.
Gainers led losers 2,051 to 601 on volume of 58.9 billion rupees (1.37 billion dollars).
The rupee was flat against the dollar at 42.7 and fell against the euro to 67.34 from 66.97.
India's leading vehicle manufacturer Tata Motors fell 40.35 rupees or 8.24 percent to 449.1, while private sector housing finance firm HDFC fell 182.15 rupees or 8.15 percent to 2,052.7, on fears of a slowdown of India's economy.
Software stocks fell on renewed concerns of a US recession, with India's third largest software exporter Wipro closing 37.35 rupees down or 7.78 percent to 442.6, while the second largest software exporter Infosys fell 74.25 rupees or 4.17 percent to 1,707.6.
Several Indian software firms outsource work from US-based clients.
Copyright © 2009 AFP. All rights reserved. More »
