Indian shares snap two-day gains; RBI dampens mood

Wed Jan 16, 2013 4:31pm IST

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* BSE index falls 0.85 pct; NSE ends 0.9 pct lower
    * Macquarie ups Sensex target to 22,200 from 21,600
    * Investors stick to India, but look at China - BofA-ML
    * Reliance Industries gains ahead of earnings

    By Abhishek Vishnoi
    MUMBAI, Jan 16 (Reuters) - Indian shares fell on Wednesday
snapping two days of gains, led by declines in rate-sensitive
stocks, such as ICICI Bank, following media reports that the
central bank chief raised concerns about the high inflation,
denting hopes of a 50 basis points rate cut this month. 
    RBI Governor Subbarao has once again rained on the parade on
Indian stock markets with his remark that inflation is "still
quite high" though off its peak, and there is "no room for
stimulus" on both monetary and fiscal fronts, according to news
agencies. 
    Traders said the central bank's policy review on Jan. 29
would take precedence over earning season as the key driver for
Indian shares, especially after the RBI dampened rate cut
euphoria.
    "RBI's direction on rates would be the key as it has been
maintaining that inflation is the anchor point, so how can that
change suddenly by putting growth in top priority," said
Jagannadham Thunuguntla, Head of Research, SMC Investments and
Advisors Ltd.
    Expectations for a rate cut had gathered momentum this week
after headline inflation slowed to its lowest level in three
years. 
    The benchmark BSE index fell 0.85 percent, or
169.19 points, to end at 19,817.63, marking its biggest single
day fall since Dec. 21, 2012
    The broader NSE index fell 0.9 percent, or 54.75
points, to end at 6,001.85, closing marginally above the
psychologically important 6,000 level.
    India's Bajaj Auto Ltd shares ended 1.8 percent
lower after its prized profit margin slipped in the quarter to
December, as rising costs and a fall in exports crimped
earnings. 
    The company's margin, trumpeted as the best in the industry,
fell to 20.1 percent from 21 percent in the same quarter a year
ago, as lucrative export sales slipped 2 percent.
    Bajaj Auto's peer Hero MotoCorp Ltd also fell 0.5
percent ahead of its earnings report on Thursday.
    Shares in Tata Motors Ltd ended 3.5 percent lower
after posting lower-than-expected global vehicle sales in
December.
    Tata Motors on Tuesday said global vehicle sales in December
fell 13.9 percent to 98,968 vehicles, although sales at its key
Jaguar Land Rover unit rose 4.2 percent to 32,282 vehicles.
 
    Macquarie raised BSE index target to 22,200 points versus
21,600 earlier and NSE target to 6,900 points as against 6,600
previously.
    The investment bank said it expects reforms push to take
India to 8 percent per annum growth over the next three years,
improving to 6.7 percent in FY14 from 5.6 percent projected in
FY13. 
    A survey of fund managers by BofA Merrill Lynch also said
that Emerging market investors have adopted "a modest
overweight" position on Indian shares for the first time since
July 2010. 
    But with the risk of a hard landing receding in China, and
with a potential cyclical shift in the making, BofA Merrill
said, "there is a possibility of a move towards China over the
next few months."
    Telecommunications stocks fell on profit-taking after a
substantial rise in January, as of Tuesday's close. Idea
Cellular fell 4.4 percent, while Reliance
Communications ended 6 percent down.
    However, among stocks that gained, shares in Reliance
Industries rose 1.7 percent after rival Essar Oil Ltd
 said it swung to a net profit in the October-December
quarter, with gross refining margins at a healthy $9.75 a barrel
 
    Dealers said Essar results point to a potential improvement
in refining margins, which would be reflected in Reliance's
earnings on Friday.
    Reliance is expected to report its first increase in profit
after four quarters of declining profits, according to consensus
of analyst estimates, Thomson Reuters Starmine data showed. 
    HCL Technologies rose 1.5 percent ahead of its
December quarter earnings report on Thursday.
    
   For additional stocks on the move double click        
     
   FACTORS TO WATCH                                             
* Yen extends recovery, euro hurt by Juncker              
* Brent up slightly, economy worries cap gains             
* World shares slip as growth concerns re-emerge     
* 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 

 (Additional reporting by Manoj Dharra; Editing by Anand Basu)
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