Indian shares fall; caution prevails ahead of RBI review

Mon Mar 18, 2013 7:20am EDT

Related Topics

* BSE falls 0.7 pct; NSE ends 0.64 pct
    * Cyprus deal spooks global investors
    * RBI seen cutting rates by 25 bps

    By Manoj Dharra
    MUMBAI, March 18 (Reuters) - Indian shares fell for a second
consecutive session on Monday as interest rate-sensitive stocks
were hit a day before the central bank reviews monetary policy,
while broader sentiment was hurt after a radical bailout plan
for Cyprus spooked global markets.
    The surprise decision by euro zone leaders to partially fund
a bailout of Cyprus by taxing bank deposits, sent shockwaves
through financial markets on Monday by shaking depositors'
confidence in banks across Europe. The MSCI Asia-Pacific index
excluding Japan fell 1.7 percent. 
    Sentiment was also hit after Moody's Investors Service said
India's sustained food inflation was a negative for the
country's sovereign ratings as it exacerbated macroeconomic
    All eyes are now on the Reserve Bank of India's policy
review on Tuesday amid expectations the central bank will lower
interest rates by 25 basis points. Dealers also said a separate
cut in the cash reserve ratio, a key liquidity tool, was also
    "RBI rate cut announcement may not impact much, but stance
on further rate cuts would," said Deven Choksey, managing
director of K R Choksey Securities in Mumbai.
    The benchmark BSE index fell 0.69 percent, or
134.36 points, to 19,293.20, marking its lowest close since
March 6.
    The broader NSE index fell 0.64 percent, or 37.35
points, to 5,835.25.
    The RBI cut interest rates and the cash reserve ratio by 25
basis points each in end-January, but surprised investors with a
cautious stance on monetary policy outlook. 
    That is giving added importance to the central bank's
statement that will accompany its rate decision on Tuesday.
    Interest rate-sensitive stocks fell before the review, with
Tata Motors Ltd ending down 1.5 percent and Maruti
Suzuki Ltd falling 3.25 percent.     
    Banks were also hit, with private sector lenders still
reeling from money laundering allegations made by a journalist
last week.
    ICICI Bank Ltd fell 1.9 percent after India's no.
2 lender said it had suspended 18 employees pending an internal
inquiry into the allegations. 
    Among other decliners, state-run oil retailers fell after
lowering petrol prices by 2 rupees per litre, while keeping
diesel prices steady. 
    Indian Oil Corp Ltd lost 2.16 percent, Bharat
Petroleum Corp Ltd fell 2 percent, while Hindustan
Petroleum Corp Ltd retreated 1.33 percent.
    Shares of Coal India slumped 5.53 percent after
government sources said the government was planning to sell a 10
percent stake in the company. 
    Jet Airways Ltd fell as much as 13.6 percent after
local media reported a planned deal to sell a stake to Abu
Dhabi's Etihad may be called off, but shares sharply pared
losses to end down 2.85 percent after the carrier called the
reports "incorrect". 
    However, among gainers, Larsen & Toubro Ltd rose
0.15 percent after The Economic Times reported its
infrastructure unit was looking to raise 25 billion rupees
($462.6 million) by selling up to a 20 percent stake to
    A spokesman for L&T declined to comment when contacted by
    Bajaj Hindusthan Ltd gained 1.15 percent and Shree
Renuka Sugars Ltd rose 1.32 percent on hopes the
Indian cabinet would remove a requirement that they sell a
portion of their sugar output to the government at reduced
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   FACTORS TO WATCH                                             
* Euro tumbles after Cyprus bailout plan spooks markets   
* Euro tumbles after Cyprus bailout plan spooks markets  
* Cyprus deal shock sends euro, shares tumbling     
* Foreign institutional investor flows          
* For closing rates of Indian ADRs                       
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 (Additional reporting by Abhishek Vishnoi; Editing by
Subhranshu Sahu)