India's Benchmark Index Slides
Monday December 11, 7:03 am ET
India's Benchmark Index Slides, Banking Stocks Lead Fall
MUMBAI, India (AP) -- Indian shares tumbled Monday with the benchmark index slipping 2.9 percent, led by banking shares weakened by the central bank's move to reign in excess cash liquidity in the market.
The Bombay Stock Exchange's 30-stock Sensitive Index, or Sensex closed down 400.06 points at 13,399.43 points off its intraday low of 13,261.73 points.
The Reserve Bank of India's move to raise the cash reserve ratio by 50 basis points will force banks to keep more reserves and rein in excess cash liquidity in the market. The reserve is the proportion of deposits banks must hold with the central bank in cash.
Bank shares led the Sensex fall, with the State Bank of India down 8.18 percent at 1,243 rupees and ICICI Bank down 6.54 percent at 819 rupees.
Among other blue chips, Tata Steel fell 6 percent to 453 rupees after the company raised its bid for Corus Group PLC by 10 percent to pre-empt a competing offer from a Brazilian company. Tata Steel said it would pay 500 pence per share to acquire Corus, valuing the European steel maker at 4.7 billion pounds or US$9.2 billion.
Among the few gainers, Infosys Technologies Ltd. was up 0.1 percent to 2195 rupees on news that it was set to become the first Indian company to join an elite Nasdaq grouping when the U.S.-based exchange opens for trading on Dec. 18. Infosys will be included among the top 100 companies on Nasdaq as part of an annual revision to the Nasdaq-100 index.
Indian Finance Minister P. Chidambaram said Monday that declining stocks were no cause for concern.
"There is no need to worry. Stock markets are at their highs. Bank stocks are falling because of (the) hike," he said.
The government and the central bank will take further fiscal and monetary steps, if needed, to curb inflation, which is high due to a rapid credit growth and an expanding economy.
Dealers said there was no panic in the market and funds could once again buy at lower levels.
"The stock market had to see some correction, and I am happy with it," said Solanki at Capital Services.
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