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Shares slide 2% this week as Fed rate hike expectations dampen risk appetite

MUMBAI (NewsRise) -- Indian shares slumped 2% this week, as caution ahead of key U.S. employment data and strong indications of a rate increase by the Federal Reserve this month kept investors on the sidelines.

   The benchmark BSE Sensex declined 0.96% to 25,638.11 points Friday, its lowest since November 18, as the European Central Bank's stimulus package underwhelmed global investors. The broader NSE Nifty 50 Index fell 1.05% to 7,781.90 points.

   The Sensex was amongst the worst performing Asian indexes this week and has slipped nearly 7% in 2015 so far.

    Mobile operator Bharti Airtel, financial conglomerate Housing Development Finance Corp. and banking stocks led the declines on the Sensex this week, while pharmaceutical and metal stocks outperformed.

    "The extent of the ECB stimulus has clearly been a disappointment and is weighing on global markets," said Alex Mathews, Head Research at Geojit BNP Paribas Financial Services. "Also, the momentum for Indian markets remains weak."

   The ECB on Thursday cut its already negative deposit rate by 10 basis points to -0.30% and said it would continue buying back bonds for six months more, extending its quantitative easing program to March 2017.

    However, the authority left the quantum of its monthly bond buying unchanged at 60 billion euros per month, disappointing investors and driving declines in global risk assets.

    European stocks, which fell more than 3% Thursday, extended losses by 0.9% today. U.S. equity markets fell 1.5% overnight.

    Japan's Nikkei 225 led the declines in the rest of Asia, falling 2.18%. Hong Kong's Hang Seng and South Korea's Kospi fell 0.81% and 1.03%.  China's Shanghai Composite Index shed 1.66%.

    On the Sensex, 26 of the 30 constituents ended lower, while overall declining issues outnumbered advancing ones 1,567 to 1,177 and 168 closed unchanged.

    Index heavyweight HDFC fell 2.42% to1,171.95 rupees Friday, extending  its weekly decline to 4.7%. The stock had risen 4.4% in the previous two weeks.

    The nation's largest mobile operator Bharti Airtel fell nearly 6% this week, hurt by concerns that a plan to spend 600 billion rupees ($9 billion) over three years on network expansion will strain its balance sheet. On Friday, however, shares rose 0.48% to 321.25 rupees.

    During the week, banking shares were weighed down by concerns surrounding upcoming guidelines on a new methodology to calculate lending rates. The BSE Banking index fell 1.09% Friday, declining nearly 3% for the week.

    State Bank of India and ICICI Bank, India's largest banks by assets, declined 0.08% to 240.95 rupees and 1.71% to 261.45 rupees on Friday. SBI has fallen almost 4% since Tuesday, when the Reserve Bank of India said it would shortly announce a new methodology to determine lenders' base rates based on the marginal cost of funds. ICICI Bank fell nearly 5% in the same period.

    Cigarette maker ITC and auto manufacturer Mahindra & Mahindra fell for the second consecutive session and were among the biggest contributors to losses in the Sensex on Friday, closing lower by 2.19% at 335.60 rupees and 2.42% to 1,316 rupees.

    Dabur India fell 2.05% to 272.25 rupees Friday, hurt by the company's announcement that unrest in Nepal will drive a 10-15% decline in third-quarter juice sales.

    Sun Pharmaceutical Industries, India's largest drug maker by market value, rose 4% to 756.10 rupees after the company said it received final approval from the U.S. Food & Drug Administration for a generic version of blood cancer drug Gleevec.

    The stock, which rose more than 2% this week, had lost 18% of its value in November, weighed down by regulatory concerns over its plant in the western Indian state of Gujarat.

    The BSE Healthcare index rose 0.85% this week on value buying outperforming the benchmark index. Dr. Reddy's Laboratories fell 0.88% to 3,195 rupees Friday, but rose 3% for the week. It fell 27% in November.

    The BSE Metals Index was amongst the better performing sectoral index in the week, gaining almost 2%. Tata Steel was little changed at 240.20 rupees Friday, but rose nearly 4% this week, helped by comments from Steel Secretary that India will step up curbs on steel imports.

    Hindalco Industries gained 1.8% in the week to close at 79.10 rupees Friday.

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