The BSE Sensex faltered after a strong start on Tuesday as stubbornly high inflation and political uncertainty kept investors cautious, with a deepening eurozone crisis adding to the discomfort.
By 11:52 a.m. (0622 GMT), the main 30-share BSE index was trading down 0.4 percent at 17,492.87 points, after initially rising 0.4 percent. Twenty-one of its components declined.
Oil and Natural Gas Corp rallied as much as 4 percent after the state-run explorer beat market expectations with a 60 percent jump in quarterly profit. However, energy major Reliance Industries, lender ICICI Bank and software services bellwether Infosys fell.
Traders said that the ruling coalition government was caught in a tight spot, with huge subsidies and falling revenue widening the fiscal deficit while high inflation has triggered opposition to increases in state-controlled prices of diesel and cooking gas.
State-run oil retailers raised petrol prices on Friday, triggering demands for a rollback from many political parties. The government may now delay a planned diesel price hike for fear of stoking inflation and inviting public wrath in state elections next year.
We are also waiting for what happens in Europe. The domestic situation is also not very clear, said D.D. Sharma, vice-president at brokerage Anand Rathi.
A threat to withdraw support from the government by a key ally - the Trinamool Congress - over the petrol price hike has added uncertainty to the domestic environment. The government's inability to raise diesel prices quickly will keep investors worried about the widening fiscal deficit, said Ambareesh Baliga, chief operating officer at brokerage Way2Wealth.
ONGC, India's second-largest listed firm, was trading up 0.98 percent at 279.50 rupees after its September quarter profit was boosted by higher fuel prices and a lower subsidy burden. ICICI, the country's second-largest lender, was down 1.25 percent and mortgage lender HDFC shed 1 percent on concerns interest rates would hold firm due to high inflation.
The RBI has raised rates 13 times over 19 months, the last in October, but headline inflation remains near double digits. Food inflation accelerated to a nine-month high in late October, driven mainly by costlier protein items, belying hopes of a respite in overall price pressures in the near term. The main stock index is down 14.5 percent in the year to date, and the outlook remains hazy. In October, it had risen 7.6 percent thanks to foreign fund inflows of about $445.01 million.
Reliance Industries, which has the heaviest weight on the benchmark index, was down 1 percent, while Infosys dropped 0.4 percent. Shares in Reliance Power were up 1.1 percent ahead of the company's earnings.
The 50-share NSE index was trading down 0.47 percent at 5,259.50 points. In the broader market, there were four losers for every gainer on total volume of about 209 million shares. The MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.37 percent, while Japan's Nikkei was 1.27 percent lower.
STOCKS ON THE MOVE
SKS Microfinance fell as much as 10 percent to 188.30 rupees after the microlender posted a net loss in the September quarter. Carborundum Universal rose as much as 11.5 percent to 175 rupees after the company said it had divested entire shareholding in Laserwords Pvt Ltd for 500 million rupees.
GlaxoSmithKline Pharma fell 3 percent to 2,050 rupees after the Indian drugmaker's September quarter net profit dropped 7.6 percent.
TOP 3 BY VOLUME
* Shree Ashtavinayak Cine Vision on 10 million shares
* GVK Power and Infrastructure on 5.65 million shares
* Unitech on 5.2 million shares