Indian shares near five-month lows

Indian shares declined for the third week in four, shedding 1.5 percent on Friday to their lowest close in nearly five months, hit by continuing foreign fund outflows, while the near-term outlook was uncertain. Soaring inflation and rate rises are starting to hit corporate margins in India, tempting more foreign fund managers to slash holdings in favour of markets that can better capitalise on the global economic recovery.
The 30-share BSE index dropped 3.2 percent this week and is down 10.3 percent so far this month, with foreign funds pulling out about $755 million till Thursday as an improving US economy drew investors away from emerging markets such as India. The index is on track to record its worst monthly decline since October 2008.
On Friday, the banking sector index dropped 1.1 percent, while the auto index and the realty index fell 3.6 percent and nearly 5 percent, respectively, on concerns more rate hikes by the central bank were on the way. The main index fell for the third day on Friday and closed 1.54 percent, or 288.46 points, lower at 18,395.97 points, its lowest close since September 3, 2010.
Only eight of its components closed in the green. "I think the recent decline is overdone. There are issues on the domestic front, but a lot of it is already in the price," said Shishir Bajpai, senior vice-president of IIFL Private Wealth. "The long-term India story remains intact. These are just short-term speed breakers on our way ahead." The market breadth was negative with almost five shares declining for every share that advanced on the BSE, on an average volume of 365 million shares.
The 50-share NSE Nifty shed 1.6 percent to 5,512.15 points. Its relative strength index was at just above 30, indicating close to an oversold position. "Technically, the market looks oversold and a dead cat bounce is not ruled out right now," said Arun Kejriwal, director of research firm KRIS. Energy giant Reliance Industries led the decline, with a 3 percent fall to 914.50 rupees, its lowest close in 15 months. Auto shares such as Mahindra & Mahindra, Tata Motors, Maruti Suzuki and Bajaj Auto fell between 2.5 and 4.9 percent as higher borrowing costs are expected to squeeze consumer spending.
Top lender State Bank of India and mortgage lender Housing Development Finance Corp shed 1.3 percent and 2.8 percent, respectively. HDFC Bank bucked the trend and closed 0.3 percent higher, a day after the country's third-largest lender posted better-than-expected quarterly earnings. State-run explorer Oil & Natural Gas Corp was the top gainer amongst Sensex stocks and rose 1.9 percent. After market hours, it reported a 132 percent rise in its quarterly net profit.