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India shares fall more as Italy's political impasse spooks investors

ICICI Bank, Housing Development Finance among major losers

MUMBAI (NewsRise) -- Indian shares extended losses on Wednesday after concerns over Italy's political turmoil precipitated the biggest decline in U.S. indexes in more than a month.

The BSE Sensex dropped 0.1% to 34,906.11 and the Nifty 50 Index slipped 0.2% to 10,614.35. The losses came after a choppy session as both the indexes had briefly turned positive ahead of the expiry of monthly derivative contracts on Thursday.

Regional stocks fell following an almost 400 point decline overnight on the Dow Jones Industrial Average, triggered by political developments in Italy, which bought back fears over the Eurozone's future. Investors are worried that fresh elections in Italy, called after March's inconclusive mandate, may provide more ammunition to the parties opposed to Rome being part of the common bloc.

"Just when you think you're out, Eurozone politics pulls you back in," Morgan Stanley says in a note. "The lack of an obvious solution to this (political) impasse is troubling, especially given the size of Italy's economy and debt stock."

On Wednesday, China's benchmark index dropped 2.5%, South Korea declined 2%, and Hong Kong lost 1.5%. The Nikkei Asia300 Index of companies outside Japan shed 1.8%.

Meanwhile, Moody's Investors Service on Wednesday reduced India's gross domestic product growth forecast for 2018 to 7.3% from 7.5%.

"The Indian economy is in cyclical recovery, led by both investment and consumption. However, higher oil prices and tighter financial conditions will weigh on the pace of acceleration," Moody's said in a report. "Our growth expectation for 2019 remains unchanged at 7.5%."

India's March quarter GDP data will be released after market hours on Thursday. Economists polled by Reuters expect January-March GDP to rise 7.3% from 7.2% in the prior quarter.

Indian Oil fell 0.3%, Hindustan Petroleum dipped 2.5%, and Bharat Petroleum lost 1.3%. IOC cut petrol and diesel prices by 1 paisa on Wednesday after increasing them for sixteen straight days. Bharat Petroleum declined despite the fuel retailer reporting a better-than-expected 45% increase in fourth-quarter net profit.

ICICI Bank and Housing Development Finance were the major contributors to Sensex's losses, dropping 1.9% and 1%, respectively.

Mahindra & Mahindra and Coal India continued their earnings-driven rally, rising 3.1% to 895.60 rupees and 2.3% to 288.75 rupees, respectively.

Jefferies raised the target price on Mahindra to 975 rupees, saying the automaker was its preferred rural pick following the robust March quarter performance. Macquarie reiterated its 'outperform' call on Coal India, noting that the upbeat January-March earnings could prompt re-ratings and upgrades.

Power Grid Corp. of India added 1.1% after reporting about 5% increase in March quarter net profit. Glenmark Pharmaceuticals dropped 1.3% after posting a 17% decline in net profit for the same period.

--Nimesh Vora

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