| MUMBAI, June 18
MUMBAI, June 18 Indian shares fell more than 1.5
percent on Wednesday, heading towards their biggest single-day
fall since late January, on concerns about the impact of higher
oil prices on inflation and the government's finances.
The Indian rupee slid 0.6 percent against the U.S.
dollar and bonds also weakened.
Brent crude held above $113 per barrel on Wednesday as heavy
fighting in Iraq shut the country's biggest refinery and led to
the withdrawal of staff by foreign oil firms, stoking worries
about exports from the key oil producer.
India imports 80 percent of its oil requirements and higher
oil prices could make things more complicated for Prime Minister
Narendra Modi who won last month's elections on promises of
lower price rise, faster economic growth and new jobs.
"They have got hold of one refinery. Surging oil would
either eat into India's balance sheet or fuel inflation. It may
make life difficult for new govt and the RBI," said Nirakar
Pradhan, chief investment officer at Future Generali India Life
Asia's third-largest economy imports nearly 4 million
barrels per day (bpd) of crude oil - of which more than half a
million bpd come from Iraq.
India's government expects oil prices to rise as high as
$120 per barrel for several months because of fighting in Iraq,
potentially driving a hole of at least 200 billion rupees ($3.3
billion) in the budget, two government sources told Reuters.
The BSE benchmark index fell as much as 1.6 percent to
25,114.3 points, while the NSE index fell 1.5 percent to
7,515.5, after earlier rising 0.3 and 0.4 percent, respectively.
The rupee touched a low of 60.43 to the dollar compared with
its previous close of 60.03/04 and the 10-year benchmark bond
yield rose 6 basis points on the day to 8.66
High oil prices and the recent spike in food inflation have
pushed back hopes of interest rate cuts which added to the
negative sentiment in bonds.
Among oil refiners, Bharat Petroleum Corp fell 4 percent,
Hindustan Petroleum Corp lost 4.5 percent and Indian
Oil Corp slumped 3.9 percent.
Oil explorers also fell on worries about a higher subsidy
burden as crude oil jumps. Oil and Natural Gas Corp
fell 1.4 percent while Oil India lost 0.4 percent.
In other blue-chips, HDFC Bank fell 1.8 percent while Larsen
& Toubro lost 1.7 percent.
(Editing by Kim Coghill)