mumbai June 11, 2012, 17:36 IST
mumbai 06 11, 2012, 17:40 IST
The BSE Sensex fell, snapping five days of gains, after S&P said the country could become the first among the BRIC economies to lose its investment-grade status, in an update to a previous decision to cut the country's ratings outlook.
The report sparked profit-taking after Indian stocks posted their best weekly gain of the year last week. That rally had been fuelled by hopes the Reserve Bank of India would cut interest rates on June 18 and by the government's promise to kickstart infrastructure projects.
Indian stocks reversed earlier gains of nearly 1 percent after the S&P statement, and the falls contrasted with the relief rally seen in global shares after the euro zone's rescue package for the Spanish banking sector.
Traders are gearing up for a critical couple of weeks for Indian markets. Industrial output is due out on Tuesday, followed by the more important inflation date on Thursday, which could lead to adjustments in rate cut expectations.
"S&P scare is created by media only, but definitely more efforts are also required on fiscal discipline to turn around growth in India" said Deven Choksey, MD, K R Choksey Securities.
"Cutting down rates coupled with measures facilitating foreign flows are required to boost the economy"
India's main 30-share BSE index fell 0.3 percent to 16,668.01 points after earlier rising as much as 1 percent
The broader 50-share NSE index fell 0.3 percent to 5,054.10 points.
S&P issued on Monday a new report, "Will India Be The First BRIC Fallen Angel?", which gave further detail as to why India's investment-grade rating could be at risk.
The report, which had been available to S&P clients since Friday, did not represent a change in view from when the agency in April lowered its outlook on India's "BBB-" ratings to "negative," citing political inaction and worries about fiscal standing among other factors.
Investors took the S&P note as a cue to book profits in recent outperformers, after domestic indexes had gained close to 5 percent last week.
Reliance Industries
Among other decliners, shares in HCL Tech
Morgan Stanley added there could be a change in management responsibilities, with CEO Vineet Nayar delegating more of his functions at HCL Technologies
In a statement, the company said: "Vineet Nayar has been part of the HCL family since 1985 and is currently functioning as the CEO and Vice Chairman of HCL Technologies."
Among Monday's gainers, shares in Videocon Industries
BPCL and Videocon own 10 percent each in the Mozambique block.
Videocon Industries rose 3 percent, while Bharat Petroleum Corp added 1.3 percent.
Shares of private power producers rose on media reports the government will allow the sector to raise tariffs as a way to help offset the impact of higher fuel prices.
GVK Power & Infrastructure
