Indian shares slipped 2.12 percent to a two-week closing low on Monday after a sharper-than-expected fall in the country's October industrial output compounded concerns over slowing economic growth. The 30-share BSE index closed 343.11 points down at 15,870.35, its lowest closing level since November 25. All but three of its components declined. The index fell as much as 2.3 percent during the day.
Industrial output fell for the first time in more than two years in October as waning consumer demand took a toll. The output plunged by 5.1 percent, far worse than a median forecast for a 0.5 percent drop in a Reuters poll. Last week, India sharply cut its economic growth forecast for the current fiscal year ending in March to between 7.25 percent and 7.75 percent from its original estimate of 9 percent.
Indian shares have fallen more than a fifth this year and are one of the worst performing markets in the world. A slowdown in capital expenditure is likely to weigh on the next fiscal year's economic growth and corporate earnings, SMC Global's Thunuguntla said. He, however, does not expect the central bank to begin easing its policy stance at its review this week. India's central bank has raised rates 13 times since March 2010, which has hit growth but not been able to tame a near double-digit inflation yet.
Reliance Industries, which has the heaviest weight on the benchmark index, led the losses and closed 3.73 percent lower at 727.50 rupees. Lenders State Bank of India and ICICI Bank lost 4.97 percent and 3.29 percent respectively. BSE banking index fell 2.98 percent. Passenger and commercial vehicles maker Tata Motors fell 3.09 percent, while top car maker Maruti Suzuki fell 2.8 percent. High interest rates and fuel prices have chipped away demand for vehicles, weighing on automakers' shares.
India's showpiece $76-billion software services sector, which depends on Europe for a significant chunk of its revenue, bucked the trend after European Union leaders agreed on fresh steps to solve the region's credit crisis. The 50-share NSE index fell 2.1 percent to 4,764.60. In the broader market, there were almost 4 losers for every gainer on a total volume of 500 million shares.
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