Indian shares fell for the second week in three as they shrugged off better-than-expected factory data and ended 0.8 percent down on Friday after a massive earthquake and tsunami rattled Japan, jolting global markets. Outsourcers shed the most. Fears of unrest in Saudi Arabia also troubled investors. However, dealers said downside risks were likely to be limited from current levels for Indian equities, and expected them to trade with an upward bias in the near term.
Industrial output in January in the world's second-fastest growing major economy after China topped forecasts to grow an annual 3.7 percent, and the reading was the strongest in three months. The 30-share BSE index declined 0.84 percent, or 153.89 points, to 18,174.09 points, with about four-fifth of its components losing ground. It briefly turned positive earlier. The index dropped 1.7 percent this week. "As far as Indian markets are concerned, there was a knee-jerk reaction from the disaster in Japan," said Shishir Bajpai, senior vice-president at IIFL Private Wealth.
The biggest earthquake to hit Japan in 140 years struck the north-east coast on Friday, triggering a 10-metre tsunami that swept away everything in its path. Foreign funds have pulled out around $1.8 billion from Indian equities since the start of the year to March 9, and the index is down 11.4 percent year-to-date, making it one of the worst performing major markets in 2011.
Export-focused outsourcers dropped on concerns over weak economic data from the United States, one of their key markets. Leading software firms Tata Consultancy Services, Infosys Technologies and Wipro dropped between 1.1 percent and 2.9 percent. Leading lenders State Bank of India, ICICI Bank and HDFC Bank shed between 0.7 percent and 0.9 percent, as inflationary concerns continued to bother.
India's central bank has raised policy rates seven times since last March, and is widely expected to lift rates by another 25 basis points in its next review on March 17 to rein in inflation, which is at over 8 percent. Non-ferrous metals producer Sterlite Industries and aluminium producer Hindalco fell 3.1 percent and 1.7 percent, respectively.
Tata Steel, world's seventh-largest maker of the alloy, declined 2.5 percent. Top power equipment maker Bharat Heavy Electricals tumbled 3.6 percent after its chairman said the company may miss its new order target of 600 billion rupees for the fiscal year ending this month as it faces a slowdown in domestic orders. Reliance Communications erased 3.5 percent after rising nearly 11 percent over three previous sessions.
Kotak Securities said a term loan facility from China Development Bank, was a stamp of confidence on the company but should do little for the stock, which was already richly valued. The brokerage retained its "sell" rating on the stock. More than two shares declined for every share that advanced in the broader market on a volume of 282 million shares on the BSE, similar to the 30-day daily average volume and sharply lower than the 90-day daily average of 345 million. The 50-share NSE index shed 0.9 percent to 5,445.45. The MSCI's measure of Asian markets other than Japan dropped 1.5 percent, while Japan's Nikkei declined 1.7 percent.