Monday August 17, 04:50 PM

BSE Sensex falls 4.1 pct on global equities slide

By Pratish Narayanan

MUMBAI (Reuters) - The BSE Sensex (^BSESN : 16632.01 -222.92) dropped 4.1 percent on Monday in its biggest fall since the budget in early July, as worries about the pace of global economic recovery sparked a broad sell-of in equity markets across the world.

Concerns that poor monsoon rains -- crucial for India's domestic-demand-led economy -- will dent growth added to the gloom.

Energy giant Reliance Industries (RELIANCE.NS : 1045.95 -17.8) shed 4.7 percent to 1,939.60 rupees, while state-run explorer Oil and Natural Gas Corp lost 4.6 percent to 1,164.25 rupees as oil prices fell to a two-week low below $66 a barrel.

Non-ferrous metals producer Sterlite Industries fell 6.7 percent to 618.05 rupees and leading aluminium producer Hindalco Industries (HINDALC0.NS : 142 0) slid 7.4 percent to 100.25 rupees as prices of industrial metals declined.

Other major losers included top listed realty firm DLF, which slumped 7.8 percent to 364.40 rupees, and private-sector lender ICICI Bank (ICICIBANK.NS : 850.9 -14.6) that dropped 5.3 percent to 704.85 rupees.

"We expect a 10 to 15 percent pullback in equities led by drought-led growth cuts," Bank of America Merrill Lynch analyst Jyotivardhan Jaipuria said in a note to clients.

The 30-share BSE index fell 4.07 percent, or 626.71 points, to 14,784.92, its lowest close since July 17.

It was the biggest one-day percentage fall since a 5.8 percent drop on July 6, when the government announced a budget that disappointed investors expecting bold economic and financial reforms.

"We still expect the economy to bottom out end-2009," Jaipuria said. "Yet, the ride will be bumpier than we thought. Let's face it: India faces severe drought."

All stocks in the main index declined, with the benchmark sliding as much as 4.4 percent during trade.

In the broader market, losers led gainers by almost 3 to 1 on relatively moderate volume of 376.9 million shares.

"The feeling that the worst is not over for the world is looming large in the minds of investors," Arun Kejriwal, strategist at research firm KRIS, said.

"If I had money to invest, looking at the state the world markets and India is, I would wait for sometime. There is no hope for a major rally in the next two to three months."

Returning to a high growth rate is the greatest challenge facing India, with a weak monsoon making the task harder, but the economy may improve by year-end, Prime Minister Manmohan Singh said in his Independence Day speech on Saturday.

The economy is likely to grow by 6.5-7 percent in the year to March 2010, a top policy adviser said last week, matching the 6.7 percent growth in 2008/09, and well below the growth rates of 9 percent or more in the previous three years.

Traders said the market would be choppy till clarity emerged on the government's response to the weak monsoon.

The 50-share NSE (^NSEI : 4941.75 -63.8) index fell 4.2 percent to 4,387.90.

Asian shares were lower, with Japan's Nikkei falling 3.1 percent, while MSCI's measure of other Asian markets was down 3.8 percent.

At 1026 GMT, the FTSEurofirst 300 index of top European shares was down 2.2 percent.

The Reuters/University of Michigan Surveys of Consumers said on Friday its preliminary reading of the index of U.S. confidence fell to 63.2 from 66.0 in July, well below market expectations for a reading of 68.5.

MAIN TOP 3 BY VOLUME

* Suzlon Energy on 18.8 million shares

* Firstsource on 16 million shares

* IFCI on 15.3 million shares

STOCKS THAT MOVED

* Sugar companies fell on market talk the government would increase the amount of sugar it gets at below market prices from millers. Traders and analysts said the limit could be increased to 20 percent from the current 10 percent.

Dealers said this could affect the millers' profitability by 3-4 percent. Shree Renuka Sugars fell 3.4 percent to 171.90 rupees, while Bajaj (BAJAJAUTO.NS : 2101.05 0) Hindusthan eased 2.1 percent to 182.70 rupees. Balrampur Chini ended down 3 percent at 116.10 rupees.

* Power companies dropped after the Economic Times newspaper reported the power ministry was planning to cap the sale price of electricity sold in the open market if the projects claimed tax benefits.

The government is trying to prevent power companies from making windfall gains while enjoying the tax benefits, the newspaper quoted a power ministry official as saying.

CESC Ltd fell 4.1 percent to 312.55 rupees, while Jindal Steel (JINDALSTE.NS : 675.85 +1.9) and Power Ltd slipped 6.7 percent to 2,911.85 rupees. GVK Power & Infrastructure Ltd ended down 4.6 percent at 45.25 rupees.