S&P downgrade warning hits market, Sensex ends 162 pts down

Indian shares fell 0.9 percent on Wednesday, in the wake of downgrade warning by the rating agency Standard & Poor's and profit booking. Weak global economic growth and concerns over the ongoing Eurozone crisis also added fuel to the fire.

The BSE Sensex dropped 162.26 points to close at 18,631.10, weighed down by banks, technology, infrastructure and metals stocks.

Today rating agency Standard and Poor's said there is a significant chance of cutting India's credit rating in the future if growth prospects dim, external position deteriorates, political climate worsens or fiscal reforms slow.

This comes even though the government had raised the price of heavily subsidised diesel (along with FDI approval in retail and aviation sectors) last month to rein in its fiscal deficit and fight the threat of becoming the first of the big emerging economies to be downgraded to junk.

S&P had roiled domestic markets in April when it cut India's sovereign outlook to "negative", putting at risk the country's current rating of "BBB-", the lowest investment-grade rating by the agency. India is the only Asia Pacific (APAC) nation to see negative outlook for the Eurozone instability, S&P pointed out.

Meanwhile, the 50-share NSE Nifty fell 52.45 points to 5,652.15, which had rallied 9 percent since the September to hit 5800 level last week on consistent inflow of foreign money.

Experts feel the current correction, which was inevitable after recent sharp run up, should be bought in, especially after looking at the confidence of the government, which has been taking major steps since September to give a boost to sluggish economic growth.

Ashith Kampani, Chairman of CosmicMandala says if this government does more positive steps then it is a great time this correction to be bought in.

European markets were down 0.3 percent each (at 15:31 hours IST) following worries about the economic growth.

Back home, the Indian rupee, which gained upto 51.3 against the US dollar last week, surpassed the 53 level after the S&P warning. It was down by 39 paise to 53.11 a dollar (at 15:31 hours IST).

Infosys, country's second largest software services exporter fell 1.29 percent ahead of second quarter numbers that scheduled to be announced on Friday.

Top lender State Bank of India tanked 2.32 percent while its rivals ICICI Bank and HDFC Bank were down 1 percent each.

Housing finance company HDFC and engineering conglomerate Larsen & Toubro lost 1 percent too. State-run power equipment maker BHEL plunged 2 percent.

Telecom operator Bharti Airtel shed another 1 percent today on profit booking.

Power stocks like NTPC and Tata Power slipped around 2 percent.

Commercial vehicle maker Tata Motors and FMCG major Hindustan Unilever fell 0.7 percent each.

Cigarette major ITC and two-wheeler maker Hero Motocorp gained 0.3 percent.

Jaiprakash Associates rose 2.4 percent on value buying despite UK's CRH Plc has terminated talks to buy Jaypee Cement's Gujarat operations on valuations differences.

HCL Technologies gained 0.8 percent and Punjab National Bank moved up 0.6 percent.

The BSE Midcap Index was down 1.3 percent and Smallcap dropped 1.53 percent.

Declining shares outnumbered advancing by a ratio of 1111 to 365 on the National Stock Exchange.

Realty major DLF crashed 5 percent, continuing the fall since the state of this week.

In the second line shares, GMR Infrastructure, Indiabulls Real and Indiabulls Power plunged 8-9 percent after allegations by India Against Corruption leader Arvind Kejriwal.

NCC, IVRCL, GVK Power, Unitech, Anant Raj Industries, DB Realty, HDIL, Reliance Power and Adani Power fell 4-8 percent on profit booking.

Polaris was down 5.6 percent after its CMD Arun Jain barred by SEBI from capital markets for two years on insider trading charges.

Mahindra Satyam and Hexaware rose 1-2 percent while Firstsource rallied 10 percent.