The BSE Sensex skidded 1.4 percent to their lowest close in more than three weeks on Tuesday, extending a slide into a fourth session, as sluggish corporate earnings and stubbornly high inflation dented investor confidence.
Financials, auto and infrastructure stocks took a beating amid concerns of slowing growth, while drugmaker Cipla bucked the trend and climbed on better-than-expected quarterly results late on Monday.
The Reserve Bank of India (RBI) has raised rates 13 times since early 2010 in a bid to control runaway inflation, prompting firms struggling under rising debt costs and flagging sales to call for a pause in hikes.
There has been short selling, especially in stocks of companies that have heavy debt burden, said Manish Sonthalia, vice president at Motilal Oswal AMC. It has a lot to do with the negative sentiment that has emanated out of the Kingfisher episode. The environment is so low you hardly need any significant amount of selling to bring down the market, he added.
The head of cash-strapped Kingfisher Airlines, which has cancelled scores of flights in recent weeks, said it cannot afford to fly heavily loss-making routes, but said it had not asked the government for any bailout. The carrier said its net loss doubled in the fiscal second quarter ended Sept. 30 on higher fuel prices and operating costs.
The stock erased early losses of 6 percent and closed up 1.9 percent after top company officials told reporters business operations would continue. The main 30-share BSE stock index closed down 1.38 percent at 16,882.67 points, its lowest close since Oct. 21. It had risen as much as 0.3 percent early in volatile trade. Twenty-seven of its components ended lower.
The benchmark has been one of the world's worst performers in the year to date, falling 17.7 percent on slowing outlook for growth. Macquarie downgraded its India's growth forecast for the year to March 2013 by 1 percentage point to 6.9 percent due to a lack of policy reforms and the lagged impact of monetary tightening.
According to the latest Reuters poll of economists on FY13 growth, conducted in mid-October, the lowest growth forecast was 7.1 percent.
Bank stocks dropped on concerns that continuing high inflation may not allow the central bank to pause its monetary tightening. Largest lender State Bank of India and ICICI Bank, which also have large exposure to Kingfisher, fell 1.3 percent and 3.8 percent respectively.
Shares in auto firms were under pressure after heavyweights Tata Motors and Mahindra and Mahindra reported lower-than-expected results. Indian automakers have been hit hard by rising costs and the series of rate hikes that have deterred new purchases in recent months. Car sales in October fell 24 percent, the biggest monthly drop since December 2000.
Mahindra shed 4 percent, its second straight day of decline after results, while Maruti Suzuki ended down 2.3 percent, after touching its lowest level in two-and-a-half years. Tata Motors, which had slid 10 percent this month ahead of results, ended 1.9 percent higher on short covering.
Energy major Reliance Industries, which had seen gains in recent weeks, lost 1.7 percent. Leading private-sector utility Tata Power dropped 2.5 percent to 98.80 rupees after it swung to a quarterly loss due to foreign exchange losses and higher provisions.
Cipla rose 6.5 percent to 306.85 rupees after the drugmaker beat expectations with a 17.5 percent rise in quarterly profit, helped by lower input costs and higher utilisation of a new unit that enjoys higher tax breaks.
The 50-share NSE index closed down 1.55 percent at 5,068.50 points. In the broader market, declines outnumbered gainers in the ratio of 6.5:1, on moderate volume of about 617 million shares.
STOCKS THAT MOVED
* Real estate firm Sobha Developers Ltd fell 2.7 percent to 220.60 rupees after its September quarter profit fell 31 percent.
* Power equipment maker BGR Energy Systems Ltd fell 5.2 percent to 281.50 rupees after the company's second quarter profit dropped 34 percent.
* Brokerage Citigroup also downgraded the stock to 'sell' from 'neutral' and cut its target price by a third citing balance-sheet deterioration.
TOP THREE BY VOLUME
* Shree Renuka Sugars on 41.1 million shares
* Kingfisher Airlines on 27.9 million shares
* Tata Motors on 22.3 million shares