The BSE Sensex skidded 2.6 percent on Monday to its lowest close in more than six weeks and falling for an eighth straight session - its longest losing streak since May - as a sharply weaker rupee hammered sentiment, already weighed by faltering economic and corporate growth.
The rupee touched its lowest in 32-1/2 months as local oil importers bought dollars. Earlier, R. Gopalan of the finance ministry said the monetary authorities had limited ability to intervene in the forex market. Fears about Italy and other debt-strapped euro zone nations with Moody's warning about France's rating outlook also led to the flight of investors from the risky assets from markets across the globe.
Shares in energy major Reliance Industries, the heaviest on the index, led the decline closing 2.7 percent down, with software outsourcers and lenders also dragging.
The main 30-share BSE benchmark index fell 425.41 points to 15,946.10 points, posting its worst fall in more than eight weeks, with all but two of its components closing in the red. It had shed 4.1 percent on Sept. 22. The index has fallen 9.2 percent in the last eight trading sessions amid worries about the inability of the government to push through major policy decisions and slowing corporate earnings growth.
Investors are looking nervous over the disappointment from the quarterly earnings season and to their dismay, things are only looking to continue in the same fashion, said D.K. Aggarwal, chairman of SMC Investments and Advisors. He said the outlook for the market had been clouded by the sharp depreciation in the rupee and high interest rates which have resulted in cost pressure for companies.
The parliament will convene for its winter session on Tuesday, but investors aren't expecting much in terms of key reforms proposals getting approved, analysts said.
All parties are eyeing state elections next year. Very unlikely that anything of consequence will be passed in the parliament, said R.K. Gupta, managing director at Taurus Asset Management in New Delhi.
Bank of America Merrill Lynch has cut its India GDP growth estimate for FY13 by 30 basis points to 7.2 percent citing a deteriorating global environment.
Securities and investment banking group Jefferies too said investors should expect further earnings downgrades for Indian companies as profit shrunk in the last quarter and macro conditions deteriorated. A near double-digit inflation has forced the Reserve Bank of India to raise interest rates 13 times since March 2010, slowing down Asia's third-largest economy.
Indian shares, down more than a fifth this year, are among the world's worst performing markets. Foreign portfolio investors have bought equities worth $539 million so far this year, sharply lower than $29 billion they invested in 2010.
We need some positive trigger. But there is none, said Alex Mathews, head of research at Geojit BNP Paribas Financial Services.
Top lender State Bank of India fell 3.15 percent, while smaller rivals ICICI Bank and HDFC Bank shed 5 percent and 2.98 percent respectively.
The lingering euro zone debt crisis and political gridlock in the United States on how to slash the deficit deepened the global economic uncertainty, dimming business prospects for India's software sector that gets bulk of its revenue from overseas.
Leading software services exporter Tata Consultancy Services fell 1.8 percent to 1,067.20 rupees, while smaller rival Infosys closed with a loss of 2.6 percent at 2,670.10 rupees.
A weak currency wouldn't help IT exporters beyond a point as they hedge their position, said Ambareesh Baliga, chief operating officer at brokerage Way2Wealth Securities.
Bharti Airtel fell 2.3 percent after the federal police searched its office along with that of Vodafone's Indian unit over the weekend, seeking details on spectrum allocation by the government to operators between 2001 and 2002. Bharti Airtel said on Saturday all spectrum given to it had been as per the government policy, while Vodafone said its documents were in complete compliance with the governing laws.
The 50-share NSE index also ended down 2.6 percent at 4,778.35 points. In the broader market, there were three losers for every gainer on a volume of more than 601 million shares.
STOCKS THAT MOVED
* Rural Electrification Corp (REC) gained on media reports that Tamil Nadu Electricity Board (TNEB) has sought the power regulator's approval to increase tariffs by 38 percent. REC, a lender to TNEB, ended up 1.82 percent at 181.35 rupees ($3.53).
* Maruti Suzuki, India's top car maker, closed up 0.26 percent, in a market that saw broader sell-off, after brokerage CLSA said value was emerging in the beaten-down automaker and its fair value was 1,150-1,325 rupees, much higher than Monday's closing price of 943.05 rupees.
TOP THREE BY VOLUME
* Suzlon Energy on 43.3 million shares
* Shree Renuka Sugars (SRES.NS) on 19 million shares
* Pipavav Defence and Offshore Eng on 18 million shares