June 18, 2014 / 11:07 AM / 4 years ago

UPDATE 1-Indian shares fall over 1 pct on Iraq conflict; Fed on watch

* BSE index falls 1.1 pct; NSE index down 0.96 pct
    * Cipla touches 8-1/2 month high on stake-sale talk
    * Reliance slumps post annual shareholder meeting

 (Adds more stocks, and updates price action)
    By Abhishek Vishnoi
    MUMBAI, June 18 (Reuters) - Indian shares slipped more than
1 percent on Wednesday, falling for three out of four sessions
as blue-chips including oil refiners slumped on concerns about
the impact of higher oil prices on inflation and the
government's finances.
    The Indian rupee slid 0.65 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 the new government and the RBI," said
Nirakar Pradhan, chief investment officer at Future Generali
India Life Insurance.  
    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 lost 1.1 percent or 274.94 points to
25,246.25 after earlier falling as much as 1.6 percent 
    The NSE index fell 0.96 percent or 73.50 points to 7,558.20
after earlier slumping as much as 1.52 percent, also closing
below the psychologically important 7,600 level.
    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.
    Falls also tracked weak global shares after a surprisingly
high reading for U.S. inflation threatened to give a hawkish
tilt to the Federal Reserve's policy outlook later in the
    Among oil refiners, Bharat Petroleum Corp fell 3
percent, Hindustan Petroleum Corp lost 5 percent and
Indian Oil Corp slumped 2.3 percent.
    Oil explorers also fell on worries about a higher subsidy
burden as crude oil jumps. Oil and Natural Gas Corp 
declined 0.5 percent, while Oil India lost 1.3 percent.
    Reliance Industries fell 2.1 percent due to lack
of any big announcements related to gas pricing and its telecom
unit Reliance Jio Infocomm in its annual shareholder meeting,
dealers said.
    Among other blue-chips, HDFC Bank fell 1.4 percent
while Larsen & Toubro lost 0.8 percent. 
    Tata Motors fell 1.8 percent while ICICI Bank
 ended 1.9 percent lower.    
    However, Cipla Ltd ended 2.9 percent higher after
earlier rising as much as 7.3 percent to 443.25 rupees, its
highest since Oct. 4, on speculation that the company's founders
are in talks to sell their stakes to a global pharmaceutical
company, multiple dealers said. 
    A spokeswoman for the generic drugmaker termed the rumour as

    For additional stocks on the move double click       
   FACTORS TO WATCH                                             
* Dollar supported before Fed                            
* Brent rises towards $114 with deepening Iraq violence   
* Dollar holds firm as markets sniff risks of Fed   
* Foreign institutional investor flows         
* For closing rates of Indian ADRs                      
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 (Editing by Kim Coghill and Anand Basu)
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