The BSE Sensex fell more than 1 percent on Friday, extending losses to a third consecutive session, in anticipation of subdued quarterly earnings beginning next week, with many companies seen hit by high borrowing costs and slowing growth.
Concerns about the impact of the eurozone crisis on the global economy pushed Asian shares down, while a weak euro triggered worries about the outlook for the rupee that slumped nearly 16 percent in 2011.
The main 30-share BSE index was down 1.15 percent at 15,674.37 by 10:46 a.m. (0516 GMT), with 27 of its components falling.
The market has turned cautious as we move closer to the earnings season, said Ambareesh Baliga, chief operating officer Way2Weath Securities. People are expecting companies to show forex losses and some of these losses may be bigger than what is estimated.
The benchmark index, which fell nearly a quarter in 2011, rose more than 3 percent in the first two days of the new year before pulling back again.
Financial stocks led the losses with State Bank of India, falling 1.9 percent after the top lender said it considered loans given to cash-strapped Kingfisher Airlines (KING.NS) as a non-performing asset.
Kingfisher slumped as much as 11 percent after the DGCA asked the carrier to provide a specific timeline for getting its grounded aircraft back in the air and for its recapitalization efforts.
Private-sector lenders ICICI Bank (ICBK.NS) fell 2.5 percent and HDFC Bank (HDBK.NS) was down 0.8 percent.
Motorcycle makers Hero MotoCorp (HROM.NS) and Bajaj Auto (BAJA.NS) fell 3.2 percent and 1.6 percent, respectively, on worries earnings would be subdued. Utility vehicle and tractor leader Mahindra & Mahindra (MAHM.NS) dropped 1.3 percent.
The broader 50-share NSE index was down 1.3 percent at 4,690.3. In the broader market, there were 1.6 losers for every gainer on volume of 146 million shares.
STOCKS ON THE MOVE
* Pfizer Ltd (PFIZ.NS) rose as much as 2 percent after the drugmaker's board approved setting up a new unit to spin off its animal health business.
* Cairn India (CAIL.NS) rose 2 percent after investment bank Macquarie raised its target price and maintained its outperform rating, citing in-house upgrade of crude oil price assumptions and rupee depreciation.
MAIN TOP 3 BY VOLUME
* Suzlon Energy (SUZL.NS) on 5 million shares
* IFCI (IFCI.NS) on 4.2 million shares
* Jaiprakash Associates (JAIA.NS) on 3.1 million shares