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Indian shares drop over 2 pct as Fed signals end to stimulus; flows key
June 20, 2013 / 11:14 AM / 4 years ago

Indian shares drop over 2 pct as Fed signals end to stimulus; flows key

* BSE index falls 2.74 pct; NSE ends 2.86 pct lower
    * Indexes fall most in a day in nearly 21 mths
    * High FII holding expected to make pvt banks vulnerable
after Fed

    By Abhishek Vishnoi
    MUMBAI, June 20 (Reuters) - Indian shares fell more than 2
percent on Thursday, the most in a day in nearly 21 months as
blue chips such as Reliance Industries slumped after the U.S.
Federal Reserve signalled a tapering of its monetary stimulus,
stoking fears of portfolio outflows.
    Emerging markets, many of which have been primed by easy Fed
money, saw some of the biggest selling as investors rushed to
the exits. MSCI's benchmark index for emerging equities slumped
 by more than 3 percent. 
    India's rupee hit an all-time low against the U.S.
dollar, prompting central bank intervention and highlighting the
country's dependence on foreign capital inflows to fund its
current account deficit. 
    FIIs have been sellers in index futures for the past 13 out
of 14 sessions, totalling 88.46 billion rupees ($1.51 billion).
They have also sold cash shares for seven straight sessions,
totalling 39.41 billion rupees as per exchange and regulatory
    "The reaction to Fed is exaggerated, outflows may happen but
with the rupee so cheap it may be time for new money to also
come in," said Paras Adenwala, managing director and principal
portfolio manager at Capital Portfolio Advisors.
    Sentiment was also fragile after China's factory activity
weakened to a nine-month low in June as demand faltered, a
preliminary survey showed, heightening risks that a second
quarter slowdown could be sharper than expected. 
    India's benchmark BSE index slumped 2.74 percent,
or 526.41 points, to end at 18,719.29, to mark its lowest close
since April 15.
    The broader NSE index fell 2.86 percent, or 166.35
points, to end at 5,655.90. It earlier fell as much as 3.03
    Blue chip stocks such as Reliance Industries Ltd 
fell 4.05 percent, while cigarette-maker ITC Ltd ended
2.18 percent lower.
    Shares of large-cap private banks also fell as traders fear
that the high foreign holding in these stocks makes them more
vulnerable to a sell-off after the Fed decision. 
    ICICI Bank Ltd, with 37.94 percent FII holding,
fell 3.7 percent, while HDFC Bank, where FIIs hold
34.07 percent of total shares, slumped 4.3 percent.
    Traders worry that an end to the U.S. monetary stimulus
could lead to portfolio outflows, pushing the rupee 
lower and, in turn, delaying any rate cuts from the central
    Among other interest-rate sensitive stocks, DLF Ltd 
slumped 7.2 percent, while Unitech Ltd dropped 5.4
    Auto makers also fell, with Maruti Suzuki India Ltd
 down 1.2 percent and Mahindra and Mahindra Ltd
 ending 3.8 percent lower.
    Sintex Industries Ltd's shares fell 7.3 percent
after it was announced that the stock would be excluded from the
National Stock Exchange's derivatives segment. 
    Among the gainers, Apollo Tyres Ltd rose 0.9
percent after declining 33.7 percent in five sessions as
investors fretted over the debt it will take on to fund its
$2.5-billion acquisition of U.S.-based Cooper Tire & Rubber Co
    For additional stocks on the move double click       
   FACTORS TO WATCH                                             
* Dollar rises as Fed signals stimulus scale-back         
* Oil falls $2 on China slowdown concern, Fed plan         
* Bonds, shares slump as Fed signals end to stimulus 
* 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 
($1 = 58.7400 Indian rupees)

 (Editing by Prateek Chatterjee)

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