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Mumbai: Indian shares fell 3.4 per cent on Friday, pulled down by financials ahead of an expected rise in official interest rates next week and Reliance Industries, with sentiment roiled in late trade by blasts in the IT city of Bangalore.
Bangalore, home to top outsourcers Infosys Technologies and Wipro, was hit by seven low-intensity bombs, killing one and wounding at least 15.
"The Bangalore blasts created nervousness on the minds of the investors," Deven Choksey, chief executive at brokerage KR Choksey, said. "And in any case we are just correcting after the euphoric rise after the government won the vote of confidence."
Reliance Industries, India's most-valuable firm and the most heavily-weighted stock in the main index, fell 6.9 per cent to Rs2,147.35, its sharpest fall in six months, on disappointment with its June quarter results.
JPMorgan said while Reliance's net profit was marginally above its expectation, gross refining margins could weigh on the stock in the near term.
Late shock
The main 30-share BSE index fell 502.07 points to 14,274.94, with 23 components falling. The market fell as much as 3.8 per cent in late trade on news of the Bangalore blasts.
The index ended the week up 4.7 per cent on the week, its third straight weekly gain, but is still down nearly 30 per cent in 2008.
The market had risen almost 10 per cent over the first three days of the week, driven by the government winning a vote of confidence in parliament on Tuesday.
ICICI Bank fell 9.6 per cent, its sharpest fall in four months, to Rs656.85. Top lender State Bank of India eased two per cent to Rs1,448.75.
The two banks report their quarterly results today. HDFC Bank fell 7.2 per cent to Rs1,127.15.
Khandwala Securities said worries of high interest rates and weakening corporate profits weighed on sentiment, with long-term investors waiting for Tuesday's monetary policy review. Seven out of 11 economists polled by Reuters expect the central bank to raise its key lending rate by 25 or 50 basis points from 8.5 per cent to try to cool double-digit inflation.
Traders said investors were also edgy after oil, India's largest import and blamed for its inflation woes, started rising after two weeks of losses that had taken it to seven-week lows. In the broader market, 1,154 gainers trailed 1,457 losers gainers on volume of 338 million shares.
Traders said a sustainable rally was unlikely until overseas funds resumed buying equities consistently. Foreign funds have pulled out $6.5 billion worth of shares in 2008. In 2007, they had moved in $17.4 billion, helping the index rally 47 per cent to record highs.
The 50-share NSE index dropped 2.74 per cent to 4,311.85.
Elsewhere in the region, Karachi's 100-share index fell 1.12 per cent to 11,032.17.
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