The BSE Sensex fell more than 1.5 percent in early trade on Friday as fresh worries over the European debt crisis compounded lingering concerns about slowing domestic growth and rising interest and cost pressures.
Shares in largest-listed company Reliance Industries Ltd, and frontline banking and auto stocks led the losses, and even shares of software exporters could not register any gains despite the rupee slumping to a near-32 month low.
Basically there is uncertainty about earnings going forward, input costs staying elevated and fiscal deficit, said K.K. Mital, chief executive for portfolio management services at Globe Capital. All these headwinds are impacting market confidence and fresh buying is just not taking place, he added.
By 10:56 a.m. (0526 GMT), the main 30-share BSE index was trading 1.51 percent lower at 16,220.09 points, with 25 of its components trading lower . The index is on track to post its third straight weekly decline.
The benchmark is down nearly 20 percent in 2011 and is among the worst performing markets in the world. Foreign portfolio investors have bought equities worth about $600 million so far this year, sharply down from $29 billion they invested in 2010.
Analysts said with several stocks close to their year-lows, promoters were facing pressure on shares pledged with lenders, further weighing down the market. More than $33 billion worth of shares have been pledged with banks as collateral, with founders of as many as 17 companies pledging over 90 percent of their holdings, Bank of America-Merrill Lynch said in a June report.
Energy major Reliance, which has the highest weightage in the index, dropped 2 percent to 793.55 rupees. The stock has fallen nearly 10 percent so far in November.
Banking shares continued their downward trend on worries that rising slippages and provisioning due to high interest rates would impact earnings in coming quarters. ICICI Bank fell more than 3 percent to trade at its lowest level since June 2010, while largest lender State Bank of India lost 2.1 percent. The sector index was down 2.1 percent.
Auto stocks, which have also been under pressure due to a sharply lower demand, also took a beating. Maruti Suzuki fell 3.5 percent to its lowest level in 2-1/2 years, while Tata Motors and Mahindra & Mahindra fell 4.3 percent and 2.4 percent respectively.
The rupee fell past 51 per dollar for the first time in nearly 32 months, but did not have a positive impact on software services exporters such as Tata Consultancy Services and Infosys, which get more than half their revenue from the United States. TCS fell 1.9 percent, Infosys was down 0.4 percent, while smaller rival Wipro lost 0.8 percent.
Among stocks that bucked the downward trend, largest two-wheeler Hero Motocorp was up 2 percent, while drugmakers Sun Pharmaceutical and Cipla rose more than 1 percent each.
The 50-share NSE index was down 1.5 percent at 4,861.60 points. In the broader market, losers outnumbered gainers in the ratio of 6:1 on moderate volume of 224 million shares.
STOCKS ON THE MOVE
* Kingfisher Airlines fell nearly 18 percent on concerns about the cash-strapped carrier's ability to tie up funds to continue operations. The stock recovered partly, but was still trading down 7 percent at 23.35 rupees.
On Thursday, civil aviation minister ruled out a public bailout for Kingfisher or any other airline, urging private airlines in India to put their own house in order.
* Suzlon Energy fell 8 percent to a fresh all-time low of 23.30 rupees a day after the controlling shareholders in the wind turbine maker sold a stake of about 2 percent for $20 million.
* JSW Energy fell more than 7 percent to an all-time low of 42.35 rupees after the Economic Times reported that regulatory authorities have rejected the company's plea to revise power tariffs because of difficulty in procuring fuel from Indonesia.
TOP THREE BY VOLUME
* Suzlon Energy on 21.8 million shares
* Kingfisher on 11 million shares
* Jaiprakash Associates on 10.1 million shares