Market wilts as growth forecast tilts

Indian shares fell sharply for the second straight session after the government cut economic growth forecast for fiscal 2012 and said meeting fiscal targets would be a challenge. The BSE Sensex ended shed 275 points at 16,214 and the Nifty ended at 4,867, down 77 points.

During the day, the BSE benchmark index touched the day’s low at 16,142 and the day’s high at 16,383.

Meanwhile, key European shares remained volatile with a negative bias since early trades, on doubts whether European leaders would arrive at a probable solution at the European summit that ends later in the day.

In a mid-year economic review presented in parliament, the government said the economy is expected to grow around 7.5 per cent, sharply lower than the original estimate of 9 per cent.

The government, in its mid-term review of the economy, said on Friday that meeting its fiscal targets would be a challenge in a slowing domestic economy and uncertain global environment as it slashed its economic growth forecast for FY12.

The government further said "maintaining the growth momentum in the economy with price stability is one of the biggest policy challenges that India is facing in recent times," according to the analysis tabled by Finance Minister Pranab Mukherjee in Lok Sabha at noon today.

The losses were led by index heavyweight Reliance Industries, which ended down 3 per cent at Rs 756.

Auto shares declined on reports that passenger car sales would fall to single digits compares with over 10 per cent growth so far. Mahindra & Mahindra, Bajaj Auto and Tata Motors fell    3-4 per cent each and Bharat Forge shed nearly 2 per cent.

Capital goods shares declined ahead of the industrial output data for October to be tabled on Monday. BHEL and L&T both eased 3-4 per cent each.

Public sector bank shares trimmed some of their early losses after the finance minister Pranab Mukherjee announced that the Plan Panel has approved Rs 14,000 crore for the Public Sector banks' capitalization. SBI was marginally down 0.1 per cent after dropping over 2 per cent in early trades.

In the private sector, HDFC Bank and ICICI Bank were both down 2 per cent each.

Among other shares, Geojit BNP Paribas Financial Services ended up 7 per cent, after having rallied nearly 10 per cent to Rs 17.80 after the board of directors of the company approved the sale of its entire stake in a joint venture company to BNP Paribas SA for Rs 40.50 crore.

Kingfisher Airlines tumbled 4 per cent over reports that the service tax commissioner's office has frozen bank accounts of the airline for not depositing tax of Rs 220 crore it had collected from passengers and clients.

The broader markets also ended lower.  The BSE mid and Small-cap indices ended down 1 per cent each. 

The overall breadth was extremely negative as 1,648 stocks declined while 1,040 advanced.