Indian shares slipped for the fifth day on Monday amid weak world equities and closed nearly 1 percent lower, hurt by unexpectedly slow February industrial output data. Industrial output (IIP) grew at a slower-than-expected 3.6 percent in February, dragged down by continued contraction in capital goods, but a hawkish central bank is still expected to tighten monetary policy as it battles stubbornly high inflation.
The infrastructure sector index dropped nearly 1 percent. The 30-share BSE index shed 0.97 percent to 19,262.54 points, with 22 components declining. The 50-share NSE index fell 0.96 percent to 5,785.70.
Indian markets are closed on Tuesday for a public holiday. Around 276 million shares were traded on BSE, lower than the 90-day average volume of 311 million, and the declining shares beat advancing shares in the ratio of 1.5:1. "The weak IIP data bothered the market today but overall it is only a consolidation phase," said Gajendra Nagpal, CEO of Unicon Financial.
The benchmark index had risen 9.1 percent in March, fuelled by robust foreign fund inflows as they placed their bets on India's strong economic growth story. "I would not read more into the recent declines. The way the market ran up in March, there was a growing feeling that we could be rising ahead of valuations." Foreigners have poured more than $3 billion into equities after being net sellers in the first two months of 2011.
Capital goods and infrastructure companies such as Bharat Heavy Electricals Ltd , Jaiprakash Associates and Larsen & Toubro dropped between 0.4 percent and 2.7 percent. Expectations that the central bank will raise rates as it attempts to battle stubborn inflation pulled down financial stocks. Mortgage lender Housing Development Finance Corp shed 2.9 percent. Private lender HDFC Bank shed 2.5 percent, while bigger rival ICICI Bank closed barely changed.
Top lender State Bank of India bucked the trend and edged 0.2 percent higher. Automobile stocks extended losses for the second session, after industry data showed on Friday car sales growth could slow down in 2011. Higher input costs and interest rates are seen crimping demand for cars in India, the second-fastest growing auto market in the world after China, with sales growth expected to more than halve in this fiscal year to 12-15 percent from the peaks scaled a year earlier. Tata Motors , Mahindra & Mahindra , Maruti Suzuki and Bajaj Auto fell between 1.3 percent and 2.9 percent.