Indian shares fell 0.8 percent on Thursday as intensifying turmoil in Libya led to a surge in oil prices, and traders expected the market to be wedged in a tight range in the near term as developments unfold in the Middle East. Financials contributed the most to the losses.
Negative news from overseas including surprisingly weak trade data from China and Moody's downgrade of Spain also hit investor sentiment, pushing them away from riskier bets. Brent crude surpassed $116 after forces loyal to Libyan leader Muammar Gaddafi bombed oil industry infrastructure, inflicting longer-term damage on the country's exporting capacity.
The 30-share BSE index declined 0.77 percent, or 141.97 points, to 18,327.98 points, with 21 of its components closing in the red. It is down 10.6 percent this year, as foreign funds sold a net of around $1.8 billion from Indian stocks since the start of the year to March 8.
The NSE index, or Nifty, closed 0.7 percent lower at 5,494.40 points. "All possible bad news seem to be coming in today. But, most of them are already in the price," said Rakesh Rawal, head of private wealth management at Anand Rathi Financial Services. "Every time the market lifts up its head, there is some bad newsflow that comes in to batter it," he said, adding he expects the 50-share Nifty to trade in a range of 5,300-5,500 points until the end of March. Losers beat gainers in the ratio of 1.2:1 in the broader market. Around 294 million shares changed hands on the BSE, higher than the 30-day daily average volume of 281 million shares.
Lenders dragged on concerns that already worrying inflation could rise further if oil prices stayed firm. The banking sector index dropped 1.2 percent. India's central bank reviews its monetary policy next week, and is widely expected to hike key rates, after raising them seven times since last March to battle stubborn inflation.
Leading lenders State Bank of India, ICICI Bank and HDFC Bank fell between 0.2 percent and 1.9 percent. Airline companies are staring at declining profits or probable losses in the January-March quarter as a sharp spike in crude prices, and inability to pass on high costs erode margins in a traditionally weak quarter, analysts said.
Carriers Jet Airways and Kingfisher Airlines dropped 1.8 percent and 1.1 percent, respectively. SpiceJet bucked the trend and rose 1.3 percent. State-run oil marketing companies Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum Corp shed between 0.6 percent and 1.3 percent. Oil explorer Cairn India edged 0.2 percent higher, as a rise in crude oil prices would boost its revenues.