The BSE Sensex fell more than 1 percent in choppy trade Thursday on mounting concerns of high inflation, slowing growth and faltering local currency, while retailers rallied on hopes the supermarket sector will be opened to foreign firms.
Shares in Tata Steel, Tata Motors and Tata Consultancy Services skidded lower after the salt-to-software conglomerate announced a successor to iconic Chairman Ratan Tata.
The cabinet is set to discuss Thursday opening the retail sector with a 51 percent cap on foreign holding, although it may not take a final decision. Pantaloon Retail (India) Ltd, India's biggest listed retailer, rose 4.6 percent, while Vishal Retail rallied 6.6 percent and Shoppers Stop gained 2 percent.
Currently, India allows foreign retailers to take a maximum 51 percent stake in single-brand retailers and 100 percent for wholesale operations, a policy the world's top retailer Wal-Mart and Carrefour among others have lobbied to free up further.
By 11:32 a.m. (0602 GMT), the main 30-share BSE index was down 1.37 percent at 15,485.55, with all but three of its components trading in red. The benchmark, which hit a two-year low on Wednesday, had opened 0.1 percent higher.
Local concerns are there and global concerns are playing an equally important role in today's market. The news from the German bond sale means the European crisis is unlikely to be resolved soon, said R.K. Gupta, managing director at Taurus Asset Management.
Asian stocks were subdued and the euro fell to a six-week low against the yen Thursday after an unsuccessful German bond sale raised alarm that Europe's ever-worsening sovereign debt crisis is starting to affect even the continent's economic powerhouse.
Also, it seems like FIIs (foreign institutional investors)are losing confidence in the India growth story, Gupta said.
The main index is down more than 24 percent this year to be among the world's worst-performing equity markets. Foreign funds have been net sellers of more than $600 million worth of shares over six trading sessions till Tuesday, reducing the net inflows in 2011 to about $113 million, sharply below record investments of more than $29 billion seen in 2010.
Shares in Tata Steel fell 3.4 percent while top software exporter Tata Consultancy Services and vehicle maker Tata Motors were down more than 1 percent each. Tata Group, India's biggest corporate house, said Wednesday Cyrus Mistry would succeed Ratan Tata when he retires in December 2012, ending a global search that lasted more than a year.
Mistry, whose father is the biggest shareholder in the Tata Sons holding company, has big shoes to fill in succeeding Ratan Tata, who has built the group from a $5 billion operation of steel making, commercial vehicles and hotels into a global empire with $83 billion in annual revenue.
Energy major Reliance Industries, India's most-valuable firm and the heaviest stock in the main index, fell 1.3 percent, while software bellwether Infosys Ltd was down 1.2 percent.
Infosys Chief Executive S.D. Shibulal said Wednesday the No.2 Indian software services exporter expects its fiscal third-quarter sales close to the low end of its forecast as customers delay decisions on large contracts amid economic uncertainties.
The 50-share NSE index was down 1.30 percent at 4,645.55. In the broader market, there were more than two losers for every gainer on volume of about 236 million shares.
Traders said the market would remain volatile on Thursday due to the expiry of monthly derivative contracts later in the day.
The rupee, which has slumped more than 14.5 percent this year due to a swelling current deficit and dwindling inflows, was trading higher on suspected central bank intervention and corporate dollar sales.
The currency, Asia's worst performer this year, hit a record low on Tuesday and is vulnerable to portfolio outflows if the euro zone crisis and U.S. debt woes dampen global risk appetite.
STOCKS ON THE MOVE
* SKS Microfinance reversed early gains of 5 percent and were down 1.3 percent at 113.95 rupees. The microlender said on Wednesday its founder Vikram Akula resigned as chairman and named an independent director as an interim replacement.
* Thomas Cook India was down 0.3 percent at 37.75 rupees. The tour operator said its operations would not be affected by the financial troubles of its British parent.
MAIN TOP THREE BY VOLUME
* Suzlon Energy on 16.3 million shares
* Shree Renuka Sugars on 9.6 million shares
* Unitech Ltd on 7.7 million shares