Indian shares fall to 2-mth low, erasing post-reform rally

Fri Nov 16, 2012 5:47pm IST

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* BSE index falls 0.88 pct; NSE declines 1.01 pct
    * Both drop around 2 percent for the week
    * Winter session of parliament eyed

    By Manoj Dharra
    MUMBAI, Nov 16 (Reuters) - Indian shares fell for a sixth
consecutive session on Friday to two-month lows, as blue chips
such as ICICI Bank were hit by caution ahead of the resumption
of the winter parliament session, which is seen as a key test
for the government's reform credentials.
    Indian shares are now at close to levels in mid-September,
when the government sparked a rally by announcing a hike in
diesel prices and measures to open up the multi-brand retail and
aviation sectors to foreign investment.
    However, markets have faltered since the start of October
amid doubts about the governments resolve to implement those
reforms given political opposition to some of the measures.
    Most recently, the global risk environment has worsened,
especially in light of potentially protracted negotiations over
the "U.S. cliff," sending shares down around 2 percent for the
week. 
    "If the political alignments don't work out, then it will be
a problem for the markets especially in the background of twin
deficits," said G. Chokkalingam, chief investment officer at
Centrum Wealth Management. 
    The benchmark BSE index fell 0.88 percent, or 
162 points, to end at 18,309.37 points, marking its lowest close
since Sept 13. 
    For the week, the BSE fell 2 percent, marking its biggest
weekly fall since the week ended on May 11.
    The broader NSE index fell 1 percent, or 56.95
points, to 5,574.05 points, marking its lowest close since Sept.
20. 
    The NSE also fell 2 percent for the week, its biggest fall
since the week ended on Aug. 31.
    Investors are also concerned about India's ability to
contain its fiscal deficit. Finance ministry officials conceded
privately the country will struggle to shore up its finances
after a dismal response to this week's auction of mobile phone
licences and a battle to sell stakes in state companies.
 
    Financial shares were among the leading decliners on Friday:
ICICI Bank fell 2.6 percent, while State Bank of India
 retreated 2.1 percent.
    Mortgage lender HDFC lost 2.3 percent.
    These rate-sensitive stocks were also hit after Reserve Bank
of India Governor Duvvuri Subbarao called inflation still quite
high, even as data this week showed the wholesale price index
unexpectedly easing last month. 
    Real estate stocks also fell, with DLF losing 2.7
percent, while Unitech dropped 5.64 percent.
    Tata Motors shares fell 2.7 percent, after the
company reported on Thursday sales at key unit Jaguar Land Rover
rose less than expected. The Indian auto maker has dropped 5.6
percent in the past three sessions.    
    Recent outperformers also fell. Ashok Leyland lost
2.7 percent after rising 17.2 percent in the last 4 sessions
following last week's much better than expected July-September
earnings. 
    However, broader losses were capped by gains as software
services exporters rose after under-performing recently. Infosys
 rose 2.05 percent on value buying, after falling 2.2
percent for the week as of Thursday's close. 
    Bharti Airtel surged 3.8 percent to end near its
highest closing level since July 30. Shares have gained 9.3
percent over the four previous session after an auction of 2G
airwaves attracted less demand than targeted by the government,
leading to lower prices.
    Bank of America-Merrill Lynch upgraded Bharti Airtel to
'buy' from 'neutral' citing the positive outcome of the 2G
auction this week.  

    FACTORS TO WATCH                                           
* Yen steadies vs dollar, euro after 2-day plunge         
* Oil firmer at $108, Mideast violence stokes supply fears 
* Growth, U.S. fiscal worries cap shares             
* Foreign institutional investor flows          
* For closing rates of Indian ADRs                       
                                
    ASIA-PACIFIC STOCK MARKETS:                                 
  
Pan-Asia........ Japan.......   S.Korea... 
S.E. Asia.......        Hong Kong...  Taiwan.... 
Australia/NZ....        India.......  China..... 
                             
   OTHER MARKETS:                                               
Wall Street ....         Gold ....... Currency.. 
Eurostocks.....         Oil ........  JP bonds... 
ADR Report .....       LME metals. US bonds.. 
Stocks News US.. Stocks News Europe     
                            
   DIARIES & DATA:                                              
Indian Data Watch   Asia earnings diary 
U.S. earnings diary     European diary       
Indian diary          Wall Street Week Ahead   
   
Eurostocks Week Ahead                                   
                              
   TOP NEWS:                                                    
   For top Asian company news, double click on:       
   U.S. company news  European company news  
   Forex news        Global Economy news  
   Technology news  Telecoms news        
   Media news       Banking news           
   Politics/General    Asia Macro data      <ECONASIA   

 (abhishek.vishnoi@thomsonreuters.com)
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