* Biggest 1-day drop since July 6; worst close in a month
* Poor monsoon rains dent recovery hopes, hit sentiment
* Weak U.S. consumer confidence data drags overseas mkts
* Reliance, ONGC, Sterlite fall as commodities prices drop
* ICICI, Hindalco, DLF among other major losers
(Adds closing prices, details, analyst comments, European
markets performance)
By Pratish Narayanan
MUMBAI, Aug 17 (Reuters) - Indian shares dropped 4.1
percent on Monday in their 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 (RELI.BO) shed 4.7 percent
to 1,939.60 rupees, while state-run explorer Oil and Natural
Gas Corp (ONGC.BO) 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 (STRL.BO)
fell 6.7 percent to 618.05 rupees and leading aluminium
producer Hindalco Industries (HALC.BO) slid 7.4 percent to
100.25 rupees as prices of industrial metals declined.
Other major losers included top listed realty firm DLF
(DLF.BO), which slumped 7.8 percent to 364.40 rupees, and
private-sector lender ICICI Bank (ICBK.BO) 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 .BSESN 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 index fell 4.2 percent to
4,387.90.
Asian shares were lower, with Japan's Nikkei .N225
falling 3.1 percent, while MSCI's measure of other Asian
markets .MSCIAPJ was down 3.8 percent.
At 1026 GMT, the FTSEurofirst 300 .FTEU3 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. [ID:nN14304812]
MAIN TOP 3 BY VOLUME
* Suzlon Energy (SUZL.BO) on 18.8 million shares
* Firstsource (FISO.BO) on 16 million shares
* IFCI (IFCI.BO) 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 (SRES.BO) fell 3.4 percent
to 171.90 rupees, while Bajaj Hindusthan (BJHN.BO) eased 2.1
percent to 182.70 rupees. Balrampur Chini (BACH.BO) 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 (CESC.BO) fell 4.1 percent to 312.55 rupees, while
Jindal Steel and Power Ltd (JNSP.BO) slipped 6.7 percent to
2,911.85 rupees. GVK Power & Infrastructure Ltd (GVKP.BO) ended
down 4.6 percent at 45.25 rupees.
FACTORS TO WATCH
* Indian rupee at 1-mo low on stock weakness; dlr gains
[INR/]
* Indian bond yields off-lows after borrowing comments
[IN/]
* Euro, high-yielders fall on weaker stocks, oil
[FRX/]
* Oil falls to two-week low on recovery jitters
[O/R]
* US stock futures point to drop as world stocks sink
[.N]
* World stocks, oil tumble on recovery doubts
[MKTS/GLOB]
* For closing rates of Indian ADRs
INADR
(Editing by Ranjit Gangadharan)
(janaki.krishnan@thomsonreuters.com, +91-22 6636 9138; Reuters
Messaging: janaki.krishnan.reuters.com@reuters.net))
