Mumbai: Indian shares dropped 0.4 percent on Friday, falling for a second session, as forecasts for a strengthening rupee spooked export-focused outsourcers such as Infosys that had more than doubled over the past year. Concerns that shares have become pricey also weighed on the broader market, which rose in the first three trading days this year and stretched a weekly run of gains to three. The market had jumped 81 percent in 2009. "Valuations have run up for large cap stocks. I think the focus is now on midcap stocks, where there is a valuation gap," said Ved Prakash Chaturvedi, managing director of Tata Asset Management. "Money seems to be shifting from stocks were valuations are stretched to companies with moderate valuations," he said. Outsourcers that get most of their revenue from exports fell after a Reuters poll forecast the rupee to climb another four percent in 2010 on top of 4.7 percent rise last year.
The firmer rupee is expected to have squeezed profit margins of leading software services companies in the December quarter. Infosys Technologies the number two outsourcer that releases results on Tuesday, fell 2.4 percent to 2,464.45 rupees, its lowest close in almost a month. Leader Tata Consultancy and Wipro dropped two percent and 1.3 percent respectively. "The sector has been an outperformer and there are concerns rupee may firm up from here, which is hurting the stock prices in the near term," Chaturvedi said. The 30-share BSE index .BSESN shed 0.43 percent, or 75.43points, to 17,540.29, with half of its components declining. For the week it rose 0.4 percent. Prime Minister Manmohan Singh promised on Friday his
government would improve infrastructure in Asia's third-largest economy to keep up economic growth that he said could reach 7 percent in the year ending in March.
"India's economy never did dip deep-- and it has come out pretty strong, clearly suggesting that it caught a chill rather than a flu," Citigroup said in a note earlier this month. "We believe the patient is up and about, but that it has not yet regained full vigour," it added.
Reliance Industries shed 0.3 percent to 1,101.95 rupees, with a source saying the energy major has sweetened its offer to buy a controlling stake in LyondellBasell Industries, valuing the bankrupt chemicals firm at $13.5 billion. Banks and financials edged lower on concerns the central bank may tight monetary policy to tame inflation. State Bank of India and ICICI Bank declined 0.2 percent and 1.3 percent respectively. "The feeling is that globally there is an uptrend in inflation and interest rates are likely to rise," said Chaturvedi. China's central bank raised the interest rate on three-month bills by 4 basis points on Thursday, a move that many analysts said was an incremental step in mopping up liquidity but which the market saw as the beginning of more serious tightening. Metals stocks fell on a decline in base metal prices, caused by fears of tighter Chinese monetary policy. Sterlite Industries fell nearly one percent while Hindalco dropped one percent. In the broader market, gainers led losers in a ratio of 1.4:1 on volume of 670 million shares, higher than the average 625 million this week when longer trading hours kicked off.The 50-share NSE index .NSEI closed down 0.4 percent at 5,244.75.
Stocks that moved
State-run oil marketing companies such as Hindustan Petroleum, Indian Oil Corp and Bharat Petroleum rose 1.1-1.8 percent, as oil prices steadied near $82. These companies are forced to sell fuel products at mandated discounts. BGR Energy rose 6.3 percent to Rs 552.55, after the power gear maker said it reached a technology collaboration pact with a U.S. firm for making and selling heat recovery steam generators.
Main top 3 by volume
Mahindra Satyam on 18.6 million shares, IFCI on 14.8 million shares and Unitech on 11.9 million shares.
Bureau Report
First Published: Friday, January 08, 2010, 18:55