Mumbai: The Nifty pared some of its initial losses, but closed at its lowest in almost a year on Tuesday, weighed down by blue chips as the rupee hit a record low and on expectations of a cut in US stimulus as early as next month.
Indian shares have slumped nearly 6 percent in the last three sessions as the rupee went past 64 to the dollar and bond yields spiked to a five-year high as Asia's third-largest economy bore the brunt of the global emerging markets selloff.
Stocks also extended declines after global shares sank to their lowest level in more than a month as unease about an expected cut in US stimulus and a related rise in bond yields left investors on edge.
J.P. Morgan also downgraded Indian equities to "neutral" from "overweight", citing strains in the country's balance of payments, while Citi cut its target on India's benchmark index to 18,900 from 20,800.
"If the rupee stabilises then the RBI can roll back some of its recent measures which should aid Indian shares battered in the past few weeks," said Deven Choksey, managing director at K R Choksey Securities.
The benchmark BSE index fell 0.34 percent, or 61.48 points, to end at 18,246.04, marking its third consecutive day of falls.
The broader NSE index declined 0.25 percent, or 13.30 points, to end at 5,401.45, after falling as much as 2 percent earlier in the session.
Among blue chips, Sun Pharmaceutical Industries Ltd fell 2.5 percent, while Tata Consultancy Services Ltd ended 2.3 percent lower.
In financial shares, Housing Development and Finance Corp Ltd fell 1.3 percent while HDFC Bank Ltd ended flat.
Oil and Natural Gas Corp Ltd fell 2 percent after Moody's said credit quality of Indian oil companies may weaken if the government continues to use the same subsidy-sharing mechanism as it did for the June quarter.
Shares in Tata Motors Ltd fell 4.6 percent adding to Monday's 3.9 percent decline after Moody's said the company's shrinking market share in passenger and commercial vehicle sales was credit negative and would lead to weaker operating performance.
Titan Industries Ltd fell 6.1 percent, slumping 19.3 in the past three sessions as the central bank banned imports of gold coins and medallions and required domestic buyers to pay cash for the yellow metal, among other measures.
However among stocks that gained, shares in Indian units of oil and mining group Vedanta Resources Plc surged on news channel report that the government has cleared legal hurdles to the stake sale in the company's unit Hindustan Zinc Ltd.
Vedanta's unit Sesa Goa Ltd, which holds 64.92 percent stake in Hindustan Zinc, rose 16.4 percent, while Hindustan Zinc gained 13.4 percent. Sterlite Industries (India) Ltd rose 9.8 percent.Reuters
First Published: Tuesday, August 20, 2013, 17:53