India shares drop 6.6 pct on global recession fears

By Sumeet Chatterjee

BANGALORE (Reuters) - Indian shares fell 6.61 percent on Tuesday, their biggest fall in more than two weeks reversing most of the 8 percent-plus rise of the previous two days as fears of a protracted global recession saw investors pare risk again.

Reliance Industries, India's most valuable firm, fell 7.4 percent to 1,207 rupees, after having risen more than 11 percent over two days, while ICICI Bank ended down 7.8 percent at 434.15 rupees.

The two stocks, which together account for more than 20 percent of the main index, contributed most to the market fall.

Traders said the heavy selling into rallies showed the soft underbelly of the market, which hit a three-year low in October, as slowing economic and corporate profit growth and the broader financial crisis worry investors.

"Fear and panic is still there and investors are rushing to liquidate long positions as soon as the market reverses trend, whatever be the valuations," said D.D. Sharma, vice president at Anand Rathi Securities.

Larsen & Toubro dropped 6.4 percent to 863.85 rupees and Bharat Heavy Electricals fell 9.7 percent to 1,366.70 rupees on concerns a slowing economy would result in fewer orders for capital goods firms, traders said.

The 30-share BSE index plunged 696.47 points to 9,839.69, with all but one component losing ground.

JM Financial Services said investors should use the fall as a buying opportunity, as it expected the main index to rise to 10,800-11,300 in the short term.