Indian shares snapped a four-day-rally as Reliance Industries fell ahead of its earnings results while state-run banks declined on worries about their margins due to a government directive to lower their lending and deposit rates. Shares were also hit in the afternoon after Nifty futures dropped suddenly amid market speculation of a trading error. A National Stock Exchange later said it had not spotted any errors on its trading systems.
After the market close, Reliance Industries said net profit in the fiscal fourth quarter fell 21.2 percent to 42.36 billion rupees ($815 million), slightly below expectations. Shares had fallen 1.5 percent ahead of those results. The country's main 30-share BSE index fell 0.74 percent to 17,373.84 points, while the 50-share NSE index lost 0.78 percent to 5,290.85.
--- Nifty futures drop on trading error talk; NSE denies
India's BSE index rose 1.6 percent this week, marked by a rally sparked by the Reserve Bank of India's aggressive 50 basis points cut in the repo rate on Tuesday. Lenders had rallied on hopes easing move would bolster growth, but investors are now growing concerned that lenders are under pressure to lower lending and deposit rates sooner than they had hoped.
India's s state-run banks were among the day's big decliners. Bank of Baroda fell 2 percent, while Bank of India fell 2.2 percent. "There are expectations or fear in the market that government will force PSU banks to cut rates in a hurry, (which) will result in some contraction in margins in coming quarters," Manish Ostwal, a sector analyst at brokerage KR Choksey said, referring to public sector unit banks. Among other decliners, shares in Indian cement manufactures fell for the second day, after posting a fall in quarterly profit on Thursday.
Shares in ACC Ltd fell 1.6 percent, while Ambuja Cements fell 2.2 percent. Trading in the afternoon was coloured by a sudden drop in Nifty futures, which fell as much as 6.7 percent at one point. Dealers attributed the declines a potential trading error involving index futures and Infosys futures. However, India's National Stock Exchange said it had not spotted errors in its trading systems, denying the market speculation.
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