BSE Sensex drops 3.5 pct; financials, Wipro fall

The Bombay Stock Exchange (BSE) building is seen in this May 2006 file photo. The BSE Sensex fell 3.5 percent on Wednesday to their lowest close in seven weeks as investors cut positions ahead of key earnings and on rising risk aversion among foreigners.

MUMBAI (Reuters) - The BSE Sensex fell 3.5 percent on Wednesday to their lowest close in seven weeks as investors cut positions ahead of key earnings and on rising risk aversion among foreigners.

Weak global sentiment towards financials, a grim outlook for companies and falling world markets added to the gloom, traders said.

"If you see the trend, it is absolutely a flight to safety. People are getting out of whatever they don't perceive to be cash-positive companies," said Jayesh Shroff, fund manager at SBI Mutual Fund.

Heavyweights Reliance Industries and Bharti Airtel and financials led the losses as foreign investors pared their exposure.

No. 3 outsourcer Wipro fell 3.6 percent to 219.75 rupees after it gave a muted forecast as its Western clients clamoured for a cut in prices because of a global economic downturn.

The benchmark 30-share BSE index lost 3.53 percent, or 321.38 points, to 8,779.17, its lowest close since Dec. 3. Twenty-eight of its components ended lower.

Foreigners have pulled out about $660 million from Indian shares this month, following net sales of more than $13 billion in 2008, when the main index lost more than half its value.

Reliance Industries dropped 5.3 percent to 1,119.40 rupees on market forecasts the energy giant would post a drop in quarterly earnings on Thursday for the first time in three years due to lower refining margins.

Leading mobile operator Bharti Airtel dropped 5.2 percent to 583.60 rupees on worries rising competition and falling tariffs could slow down earnings growth in coming quarters. The company releases results on Thursday.

Weak European markets worsened sentiment, pushing banking stocks further.

ICICI Bank fell 7.1 percent to 369 rupees, State Bank of India lost 2.7 percent to 1,081.95 rupees and mortgage lender Housing Development Finance Corp shed

7.5 percent to 1,372.25 rupees.

Metal shares fell after the world's largest miner, BHP Billiton, announced job cuts and closure of a mine, and as stocks jumped at the London Metal Exchange warehouses.

Tata Steel fell 3.3 percent to 188.65 rupees, Hindalco lost 2.7 percent at 47.40 rupees, while Sterlite Industries dropped 8 percent to 237.25 rupees.

Consumer goods firms Hindustan Unilever and ITC were among the few gainers, up 3.4 percent and 0.2 percent respectively.

In the broader market, declines led advances in the ratio of 2.3:1 on moderate volume of 258 million shares.

The 50-share Nifty lost 3.2 percent to 2,706.15.

STOCKS THAT MOVED

* Software and services firm Educomp Solutions fell 22.1 percent to 1,534.90 rupees after a federal minister said the government would look into a media report alleging accounting fraud at the the company.

* Dr Reddy's Laboratories Ltd fell 5 percent to 444.70 rupees after the drug maker posted a below-forecast net profit for the December quarter.

MAIN TOP 3 BY VOLUME

* Satyam Computer Services on 38.6 million shares

* Unitech on 14.5 million shares

* Reliance Natural Resources on 10 million shares

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