Stocks reversed early gains to close lower for the sixth straight day after Finance Minister Palaniappan Chidambaram said companies should cut prices to boost demand, raising concern that earnings would drop.
ICICI Bank led declines among finance companies, falling 3.3 per cent, after Fitch Ratings threatened to downgrade the stock if bad debt were to climb.
“Investors haven’t taken lightly the statement from Chidambaram asking companies to cut prices,’’ said P R Dilip, managing director at investment advisory firm Impetus Wealth Management.
The benchmark Bombay Stock Exchange Sensitive Index, or Sensex, lost 163.42, or 1.8 per cent, to 8,773.78, the lowest level since October 27. It advanced as much as 3.4 per cent before shedding gains in the final hour of trade. The S&P CNX Nifty Index on the National Stock Exchange fell 48.15, or 1.8 per cent, to 2,635. The BSE 200 Index slid 1.8 per cent to 1,044.02.
India’s Sensex has declined 57 per cent this year as global financial institutions lost almost $1 trillion and cut about 166,000 jobs since the US subprime-mortgage market collapsed last year. Shares on the index are valued at 8.7 times trailing earnings, Bloomberg data show.
“Now I think the ball is in the court of suppliers and manufacturers, they have to cut prices,’’ Chidambaram said. “If they cut prices, I am 100 per cent sure that demand for homes, cars and two-wheelers will sharply pick up.’’
ICICI, the nation’s second-biggest lender, tumbled Rs 11.95, or 3.3 per cent, to 348.25. “The individual rating may be downgraded if the bank’s asset quality, which is already showing signs of weaknesses, deteriorates significantly more than anticipates,’’ Fitch said of ICICI.
State Bank slid Rs 27.4, or 2.5 per cent, to 1,081.05, the lowest since October 27.
Overseas investors sold a net Rs 6.32 billion ($127 million) of Indian equities on November 17, taking outflows from stocks this year to $13 billion, according to the nation’s stock market regulator.
