Feb 28, 2012, 03.09 PM | Source: Reuters

Sensex falls over 450 pts, posts sharpest fall in 5 mths

SENSEX-NIFTY-SESAGOA-STERLITE-RELIANCE-ICICI:Sensex falls over 450 pts, posts sharpest fall in 5 mths

Sensex falls over 450 pts, posts sharpest fall in 5 mths
By Ketan Bondre

MUMBAI (Reuters) - The BSE Sensex dropped 2.7 percent on Monday to post its biggest fall in five months, as high oil prices due to escalating tensions over Iran's nuclear programme renewed worries about domestic inflation.

Index heavyweight Reliance Industries, top private sector lender ICICI Bank, and Infosys, the country's No. 2 software services provider, led the fall, losing a combined 184 points on the benchmark.

The main 30-share BSE index fell 477.82 points to 17,445.75, with 28 of its components declining. The index is still up 13 percent this year, on foreign fund inflows of about $5.5 billion.

"Our expectation for inflation and interest rates to come down depends a lot on crude oil prices. If the latter does not come down, then inflation will not come down and rates won't fall," said Deven Choksey, CEO of brokerage K R Choksey.

Brent crude fell back below $125 after prices had surged to 10-month highs as tensions over Iran's disputed nuclear programme raised fears of supply disruptions.

"We believe oil prices remain the biggest concern at the moment, as they have ramifications for many other structural macro issues," Macquarie said in a report, adding oil prices can deteriorate current account and fiscal deficit, thereby putting pressure on the rupee.

"They tend to impact inflation with a 3-4-month lag and can prematurely derail the rate-easing cycle; third, they can increase input cost pressures and keep corporate operating margins subdued for some more time," the report on Friday said.

The BSE banking index fell nearly 4 percent on worries high inflation could make it difficult for the central bank to cut interest rates. State Bank of India fell 3.8 percent, while rival ICICI Bank lost 4.7 percent.

Energy conglomerate Reliance Industries fell 4.7 percent to 781.45 rupees, while Infosys closed down 2.2 percent at 2,883.35 rupees.

The interest-rate sensitive auto sector was among the biggest losers, with top two-wheeled vehicles maker Hero MotoCorp falling 6.8 percent, while Bajaj Auto ended 3.2 percent down.

Top car maker Maruti Suzuki ended 2.2 percent lower and tractor cum sports utility vehicle maker Mahindra and Mahindra closed down 4.6 percent.

The benchmark real estate sector index lost 5.3 percent, with India's largest listed developer DLF falling 5.3 percent, while shares in HDIL dropped 8.1 percent.

The 50-share NSE index shed 2.73 percent to end at 5,281.20.

"We are in a correction phase...but markets should invite buying back at 5,200 levels on the Nifty," Choksey said.

"But if crude oil price shows a nasty up move, then even 5,200 level for the Nifty may not hold the fort," he added.

In the broader market, there were 6.6 losers for every single gainer on total volumes of about 867 million shares.

World stocks as measured by MSCI fell 0.5 percent, while emerging equities were down 1.03 percent.


* Shares in Indian miner Sesa Goa fell more than 10 percent on Monday after parent Vedanta Resources decided to merge the company with group firm Sterlite Industries and set a swap ratio of three Sesa Goa shares for five Sterlite shares.

* Oracle Financial Services Software Ltd fell as much as 5.45 percent after the information technology solutions provider said it was not aware of any delisting of its shares by its U.S.-based parent.


* Lanco Infra with 88.3 million shares

* Sterlite Industries with 34.9 million shares

* IFCI Ltd with 34.2 million shares

(Reporting by Ketan Bondre; editing by Aradhana Aravindan)

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