Sensex dips on 456 pts on slow IIP growth

Larsen & Toubro, the country's biggest engineering company, fell the most in four months. Infosys Technologies, the nation's second-largest software services company, dropped the most in more than four years.

Production at factories, utilities and mines rose 3.8 per cent in May, the statistics office said in New Delhi. Economists surveyed by Bloomberg had forecast a 6.5 per cent increase.

The Bombay Stock Exchange's Sensitive Index, or Sensex, fell 456.39, or 3.3 per cent, to 13,469.85. The index snapped a seven-week decline, climbing 0.1 per cent. The S&P CNX Nifty Index on the National Stock Exchange fell 113.20, or 2.7 per cent, to 4,049. The BSE's technology index dropped 6.7 per cent to 3,907.63, its biggest drop since May 17, 2004.

"I'm cautious on the markets,'' said Mumbai-based Ajay Bodke, who helps manage about a $1 billion in Indian equities at IDFC Asset Management. "The macro-economic factors are weighing heavily on the performance of the market.''

Stocks also fell after the nation's inflation accelerated to 11.89 per cent, the fastest pace since 1995, raising concern the central bank will increase borrowing costs for a third time this year.

Larsen fell 7 per cent to Rs 2,354.15, its biggest drop since March 10. Housing Development Finance, India's largest mortgage lender, dropped 5.6 per cent to Rs 1,998.20.

Infosys led technology stocks lower after keeping its dollar earnings guidance unchanged and reporting that first-quarter profit growth slowed. Widening credit-market losses prompted US banking clients to delay software orders. Infosys fell 7.1 per cent to Rs 1,676.85, the most since May 17, 2004.

Net income climbed 21 per cent to Rs 1,300 crore ($303 million), Infosys said today. The company posted a 35 per cent profit increase in the year-earlier period.

Earnings per share in the year ending March 31 will range from $2.32 to $2.36, Infosys said today, compared with its previous forecast of $2.31 to $2.35.

Tata Consultancy Services, India's largest computer-services provider, declined 8 per cent to 798.60 rupees. Satyam Computer Services, the fourth-largest, slid 7.2 per cent to Rs 443.50. Indian software companies get more than half their sales from the US.