Sensex spooked by rise in Europe bond yields, rupee

MUMBAI (Reuters) - The BSE Sensex fell more than 1 percent on Thursday, dragged down by losses in blue chips on rising bond yields in Europe, while export-focussed companies dropped as the rupee surged above the key 64 level on inflows ahead of key divestments.

German and U.S. bond yields surged to their highest in more than five months, making equities look more expensive in comparison to debt and keeping Asian stock markets subdued.

The rupee rose as high as 63.81 per dollar, versus its Wednesday's close of 64.00/01, ahead of inflows related to stake sales in power producer NTPC and oil refiner Indian Oil Corp .

 

India on Wednesday approved the sale of shares in the two state-run companies as part of its plan to raise $11 billion from asset sales this financial year.

"The negative triggers have shifted from local to global factors but I think a firm bottom is in place," said G. Chokkalingam, founder of Equinomics, a Mumbai-based research and fund advisory firm.

Tax collections and capex mood indicate better days ahead, he added.

The BSE index fell as much as 1.1 percent, while the broader NSE index <.NSEI> lost 1.2 percent. Both the indexes were down 0.5 percent each at 0823 GMT.

Concerns about delay in key land acquisition reforms and over retrospective taxes on foreign investors have already led to a more than 10 percent fall in Indian stocks since the record highs hit in March.

India VIX, a gauge of expected volatility in shares, surprisingly rose alongside shares on Wednesday, amid worries about key land and tax reforms, and retrospective taxation of foreign investors.

The volatility index was up 3.5 percent at 21.41 at 0823 GMT.

Also, HSBC on Wednesday cut Indian shares to "underweight" from "overweight", the first major downgrade by a foreign bank since local shares began a rally last year, saying markets were overbought at a time when earnings were expected to slow and the scope of interest rate cuts were diminishing.

Blue chips led losses. ICICI Bank fell 1 percent, while Housing Development Finance Corp lost 1.6 percent.

Among software exporters, Infosys was down 1.4 percent and Tata Consultancy Services was lower 1 percent.

Pharmaceutical stocks also treaded water after drugmaker Lupin's January-March earnings disappointed investors.

Lupin fell 3.5 percent, while Sun Pharmaceutical Industries edged down 1.1 percent.

($1 = 63.9200 rupees)

(Reporting by Abhishek Vishnoi; Editing by Subhranshu Sahu)