Indian shares post worst weekly loss since May

Indian shares posted their worst weekly loss in eight months tumbling to four-month closing lows in volatile trade on Friday, after accelerating monthly inflation cemented rate hike fears, sending financials lower. Wholesale price index, India's main inflation gauge, accelerated an annual 8.43 percent in December, making a stronger case for the central bank to hike rates in an effort to cool spiralling inflation.
The 30-share BSE index ended down 1.68 percent, or 322.38 points, to 18,860.44 points, its lowest close since September 9. It shed 4.2 percent for the week, its worst weekly fall since May 2010. The 50-share NSE index or Nifty fell 1.7 percent to 5,654.55 points.
"If earnings next week come up with positive surprises, market should perform better," said Sandip Sabharwal, CEO of portfolio management services at brokerage Prabhudas Lilladher. Declining shares were more than double the number of advancing ones in low volume trade of 317 million shares.
Trade was volatile with the BSE main index rising as much as 1.4 percent and falling as much as 1.9 percent later. The market is now down 10 percent from its high and, a large number of retail investors who have sold puts on the market, could be forced to cover, a Hong Kong-based trader at a large US investment bank said.
Leading lenders State Bank of India, ICICI Bank and HDFC Bank closed down between 1.6 percent and 4.2 percent as a potential rate hike by the Reserve Bank of India (RBI) may dampen loan demand in the country. Mortgage lender Housing Development Finance Corp shed nearly 4 percent even as it said its quarterly net profit rose by a third.
"The central bank would remain focused on curbing inflationary expectations, which continue to move upwards as per the RBI's latest inflation expectations survey," Gaurav Kapur, senior economist at Royal Bank of Scotland, in Mumbai.
Tata Coffee jumped 20 percent after US- based Starbucks signed a pact with the Indian firm to buy coffee from India and explore opening retail stores in the country. Infosys Technologies, rose as much as 2 percent early after Goldman Sachs raised the outsourcer to "buy" from "neutral," but gave in to the broader marker decline and closed 0.3 percent lower.
On Thursday, the No 2 Indian outsourcer missed estimates for profit and future sales growth and warned of sluggish global economic growth, sending its ADRs on Nasdaq plummeting 6.3 percent. Steel Authority of India, the country's largest steel producer, fell 6.7 percent after it warned rising raw material prices were taking a toll on margins and may force further increases in product prices. The MSCI All-Country World Index and emerging markets index were down 0.3 percent each by 1051 GMT. Foreign funds have withdrawn $545 million from Indian equities since the start of the new year, pulling down the BSE index 8 percent. In 2010, the benchmark had risen 17.4 percent on the back of record $29.3 billion foreign inflow.