BSE Sensex, Nifty hit 2-year lows; banks lead losses

By Ketan Bondre

MUMBAI (Reuters) â€" The BSE Sensex ended 2.3 percent down after touching its lowest in two years on Wednesday, as domestic concerns over high inflation, slowing growth and a faltering rupee continued to sap investor confidence.

Fears of a global economic slowdown returned after gloomy data from Germany, China and the United States, further weighing on local stocks.

The 30-share BSE index closed down 2.3 percent at 15,699.97 points, with only one of its components in the positive territory. Intraday, it fell to 15,478.69 -- its lowest level since Nov. 3, 2009.

"There is a lack of confidence in the market, the parliament is almost non-functional, so the quality of decision making is hurt and the currency is also depreciating that is adding to the negative sentiment," said K K Mital, head of portfolio management services at Globe Capital.

Indian corporations, hit by waning business confidence due to deferred investment projects and the rising cost of credit, have rounded on New Delhi for failing to act on home-grown problems as the economy suffers from global shocks.

The rupee had slumped to an all-time low of 52.73 against the dollar on Tuesday, down nearly 17 percent from its 2011 high in July, on a swelling current account deficit, rising import bill and slowing export growth.

The currency pulled back Wednesday on suspected central bank intervention, but the near-term outlook remained bearish.

The finance ministry is not in favour of any "undue" intervention by the central bank to prop up the rupee, a senior finance ministry source told Reuters.

The rupee weakness is likely due to widening trade deficit, muted debt and equity inflows from foreign institutional investors, and falling hedged rate arbitrage, Credit Suisse said in a report.

"We continue to prefer companies with US$ revenues and rupee costs like IT (Tata Consultancy Services, Infosys, pharma (Sun Pharmaceutical Industries and Reliance," it added.

Foreign funds have sold more than $450 million worth of shares over five trading sessions till Monday, reducing the net inflows in 2011 to under $300 million, sharply below record investments of more than $29 billion seen in 2010.

"Redemptions are happening globally as the year is coming to a close, which is adding further pressure on the markets," said Deven Choksey, CEO and managing director, K R Choksey.

Lenders were the top sectoral losers on lingering worries about asset quality.

HDFC Bank dropped 3.85 percent, while bigger rivals ICICI Bank lost 2.5 percent and State Bank of India was down 2.03 percent.

Shares in telecom operator Reliance Communications and real estate firms DB Realty and Unitech bucked the trend and closed 0.5 percent and 20 percent up, respectively, after the country's top court granted bail to five

company executives charged in a multi-billion dollar telecoms licensing scandal.

The broader 50-share NSE index ended down 2.2 percent at 4,706.45 points.

In the broader market, there were 3.5 losers for every gainer, on a volume of 673.35 million shares.

Global sentiment worsened after a private survey showed China's factory sector shrank the most in 32 months, U.S. growth data was revised downwards and manufacturing in Germany contracted for a second straight month in November.

STOCKS THAT MOVED

* Shares in Apollo Hospitals gained 1.82 percent after it said it plans to launch 100 diabetes treatment clinics in India in 90 days.

* Tata Power closed down 3.04 percent after Citigroup downgraded the utility citing lower operating income and higher debt.

* Capital goods maker Siemens Ltd, a unit of Siemens AG, closed 2.44 percent after it posted late on Tuesday a 29 percent drop in September quarter profit.

(Editing by Aradhana Aravindan)