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Equities

India shares slump to three-month lows as trade war worries spook markets

Banks, metal producers pace decline

MUMBAI (NewsRise) -- Indian shares declined to three-month lows on Wednesday, as equities worldwide tumbled following the resignation of President Donald Trump's top economic aide amid disagreements over trade policies.

The BSE Sensex fell 0.9% to 33,033.09 and the Nifty 50 Index fell 0.9% to 10,154.20, extending their losing run that began last Tuesday. The Sensex has lost nearly 9% from its peak reached on Jan. 29, and is down by 3% in 2018.

Lenders were again the biggest contributors to the losses. Axis Bank fell 0.8% after saying that it had an exposure of 2 billion rupees ($31 million) to the fraud disclosed by Punjab National Bank in the middle of February. Shares of Punjab National continued to their downward spiral, closing 2.3% lower. The state-owned lender has lost one-third of its value following its disclosure of fraudulent transactions worth about $2 billion.

The selling pressure on lenders came amid reports that India's Serious Fraud and Investigation Office is questioning executives of 31 banks in connection with the scam, which involved using fraudulent guarantees issued through banking channels to benefit absconding jeweller Nirav Modi.

The Nifty Bank Index declined 1.3%. The country's biggest banks by assets ICICI Bank and State Bank of India dropped at least 2.9% each.

A day after the Sensex suffered its biggest decline in a month, there was little respite for investors as Gary Cohn, Trump's top economic advisor, resigned in the wake of the president's decision to impose tariffs on aluminum and steel imports. Cohn was reportedly opposed to the tariff proposals and was making efforts to dissuade Trump. His departure made it more likely that Trump will proceed with his tariff proposals, which could trigger a global trade war.

The futures on the Dow Jones Industrial Average tumbled 1.1% and S&P Index futures were down 0.8%. Hong Kong and Singapore markets paced losses among regional markets.

"Global trade war concerns are intensifying after the resignation of Cohn," Sageraj Bariya, vice president of instructional sales at East India Securities, said. "Nifty has also breached its crucial level of 10,300, and it seems that the undertone of the market has shifted from 'buy on dips' to 'sell on rise'."

Aluminium producer Hindalco Industries dropped 0.8% and Tata Steel fell 1.9%, taking their losses this week to 6.7% and 4% amid Trump's proposal to impose a 10% and 25% tariff on aluminium and steel imports, respectively.

Indiabulls Housing Finance dropped 3.6% after Morgan Stanley downgraded the stock to 'underweight.' Morgan Stanley also cut its rating on LIC Housing Finance and reduced its target price on other non-banking financial companies, saying that market borrowing rates were likely to remain high and pricing power had swung in favour of banks. Shares of LIC housing Finance closed 4.2% lower.

Stocks of the Adani Group of companies were under pressure after lawmaker Subramanian Swamy of the ruling Bharatiya Janata Party said in a Twitter post on Tuesday that the group's founder Gautam Adani was the `biggest NPA (non-performing asset) trapeze artiste' for state-owned banks. In response, the group said almost all its companies enjoyed a high credit rating from domestic rating agencies, a testimony that it meets its debt obligations diligently.

Adani Ports and Special Economic Zone, Adani Enterprises, Adani Transmission, and Adani Power ended lower by as much as 7.2%.

-- Nimesh Vora and Vidyut Deshpande

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