Indian shares slumped 4.1 percent on Thursday in their biggest one-day slide in more than two years as investors fled risky assets across global markets on a grim US economic outlook and slowing manufacturing growth in China. A sputtering US economy and headwinds from a European debt crisis could crimp foreign portfolio investments, while a sharp fall in the rupee will accelerate inflation pressures, traders said.
"We are mimicking what is happening globally. Our markets will remain weak unless there is some recovery in Europe," Sailav Kaji, director of institutional equities at Padmakshi Financial Services, said. The 30-share BSE index fell 4.13 percent, or 704 points, to 16,361.15, its lowest close in nearly one month. It was the biggest one-day percentage fall since July 6, 2009 with all of its components dropping.
World stocks as measured by MSCI fell more than 2.4 percent to a new year low, making for a 14 percent year-to-date loss. The more volatile emerging markets stock index was down nearly 5 percent for a 22 percent 2011 loss. Shares in Reliance Industries, which has the maximum weight on the main index, fell 6.1 percent in their biggest one-day fall since June 2009, after media reports the oil ministry may lower the company's cost recovery at its key gas blocks off India's east coast.
A company spokesman declined to comment when contacted by Reuters. Software services bellwether Infosys shed 3.4 percent and bigger rival Tata Consultancy Services dropped 4.7 percent. State Bank of India, the country's largest lender, lost 3.6 percent and rival ICICI Bank fell 4.3 percent. Other big losers included realty major DLF, which fell 7.2 percent, while infrastructure firm Jaiprakash Associates tumbled 9.3 percent on growth concerns. The 50-share NSE index closed down 4.08 percent at 4,923.65 points. There were 10 losers for every gainer in the broader section on heavy volume of 625.4 million shares.