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New Delhi: Indian shares dropped more than two per cent yesterday in their biggest single-day fall since early April, after a delay in raising state-set fuel prices sparked market talk there was a rift within the ruling coalition.
Traders said political uncertainty worries forced investors to cut their exposure after the market had risen as much as 1.3 per cent in early trade.
RSP, a small communist ally of India's ruling alliance, withdrew from a coalition forum that decides on policies, holding the government responsible for rising prices, a party leader said yesterday.
"We had negative global cues like Europe opened lower," said Jayesh Shroff, a fund manager at SBI Mutual Fund. "Also the talk that RSP has withdrawn support added to it."
The 30-share main BSE index fell 2.15 per cent, or 352.39 points, to 16,063.18, its lowest close since April 11, with all but four components losing ground.
Shares in state-run refiner Bharat Petroleum fell 2.5 per cent to Rs348.85, while Indian Oil and Hindustan Petroleum shed about one per cent each.
While the cost of oil imports have more than doubled since June 2006, retail fuel now costs less than two years ago after a series of revisions. Prices were last raised in February when petrol was increased by 4.6 per cent and diesel by 3.3 per cent. The government was expected to raise prices on the weekend, but a top oil ministry official said political leaders were divided on the extent of increase.
Losers
The BSE, which lost five per cent in May, is nearly 21 per cent down in 2008. In the broader market, 2,061 losers outpaced 601 gainers on volume of 61.8 million shares. Financial stocks led the fall on poor sentiment on the sector in European markets while local inflationary concerns raised fears of further tightening.
Top lender State Bank of India lost 3.4 per cent to Rs1,394.10 and No 2 ICICI Bank shed three per cent to Rs764.85. The BSE bank index dropped 3.37 per cent.
But top car maker Maruti Suzuki and leading motorcycle maker Hero Honda rallied after they notched higher sales in May.
Maruti gained 2.9 per cent to Rs786.30, while Hero Honda jumped 5.6 per cent to Rs788.55.
Shares in top cigarette maker ITC, which also has interests in personal care products, packaged food and hotels, rose one per cent to Rs219.85 after several brokerages last week maintained their positive view on the firm.
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