Indian shares fell 1.5 percent on Friday to their lowest close in five weeks as inflation worries mounted after a government official said an increase in retail fuel prices was inevitable.
Annual inflation topped 8 percent in March for the first time in 3-½ years, revised data showed on Friday, and analysts said the looming fuel price rise could push it closer to double digits.
"Inflation and crude are key deterrents," said Hitesh Agarwal, head of research at Angel Broking. "If the government raises fuel prices, it adds to inflation. If it does not the fiscal situation deteriorates."
India imports 70 percent of its oil consumption. The cost of the crude oil India imports has doubled since June 2006 but after a series of retail price revisions fuel costs less now than it did two years ago.
Petrochemical giant and refiner Reliance Industries led the decline, losing 2.4 percent to 2,554.80 rupees, its lowest close since May 14.
Tobacco maker ITC dropped 4.2 percent to 213.60 rupees, its worst close in more than three weeks, after its quarterly earnings missed market expectations.
The 30-share BSE index ended down 1.52 percent, or 257.47 points, at 16,649.64 points, its lowest close since April 17, with 25 components in the red. It had been up 0.9 percent in early deals.
The benchmark fell 4.5 percent in the week and is down nearly 18 percent in 2008.
In the broader market, losers overwhelmed gainers 1,925 to 790 on volume of 350 million shares.
Financial stocks were weighed down by concerns the central bank may again tighten monetary policy to rein in inflation.
Top lender State Bank of India fell 2.1 percent to 1,573.25 rupees and rival ICICI Bank fell 1.9 percent to 863.75 rupees.
Top telecoms firm Bharti Airtel, which is in talks with South Africa’s MTN, bucked the trend rising 2.4 percent to 836.30 rupees after smaller rival Idea Cellular sold a minority stake in a unit for $640 million.
Shares in state-run refiners Indian Oil Corp, Hindustan Petroleum Corp and Bharat Petroleum Corp rose between 3.1 and 3.8 percent in anticipation of a fuel price increase.
The refiners have been under pressure because they are forced to sell fuel to retail users at state-set low prices while global oil prices have climbed to record highs.
The 50-share NSE index ended 1.6 percent lower at 4,946.55 points.
Elsewhere in the region, Karachi’s 100-Share index dropped 4.52 percent to 13,011.74 and Colombo’s All-Share index ended 0.51 percent lower at 2,585.78.
STOCKS THAT MOVED
* Explorer Cairn India, a unit of UK’s Cairn Energy, fell 4 percent to 306.45 rupees after several brokerages cut their rating saying the firm was unlikely to announce any large discovery in the next six months and high oil prices would drive up rig demand.
* Idea Cellular ended up 0.14 percent at 107.50 rupees after mobile operator said U.S.-based Providence Equity Partners would a buy a fifth in a unit for $640 million.
TOP 3 BY VOLUME
* Ispat Industries on 35.7 million shares
* IFCI on 16.8 million shares
* Aishwarya Telecom on 11.2 million shares
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