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India stocks fall tracking Wall Street losses

RBI move on banks' credit facilities also damp investor interest

MUMBAI (NewsRise) -- Indian shares declined Wednesday, as heavyweight stocks pulled back and U.S. markets fell after President Donald Trump fired his Secretary of State.

The BSE Sensex declined 0.06% to 33,835.74 and the Nifty 50 Index dropped 0.2% to close at 10,410.90. Housing Development Finance Corp. fell 0.9% after climbing about 6% in the previous four sessions. Two-wheeler maker Hero MotoCorp lost 1.8%, and mobile phone operator Bharti Airtel slipped 1.1% after recent gains.

The Sensex had fallen by as much as 0.8% earlier in the day after the country's central bank barred Letter of Undertakings and Letters of Comfort issued by banks with immediate effect. The Reserve Bank of India's orders came after a near $2 billion fraud committed on Punjab National Bank via the issue of forged LoU's. The facilities are issued by banks to foreign branches of other lenders, based on which importers take loans. The RBI said banks may continue to issue Letters of Credit, considered safer than the LoU's, for financing imports.

"The discontinuance of issuance of Letters of Undertaking and Letters of Comfort closes one of the operationally easier modes for trade financing," Morgan Stanley said in a note. The move "could cause near-term issues, considering increased paperwork and cost as importers migrate to Letter-of-Credit-based trade financing."

ICICI Bank and Axis Bank rose 0.8% and 0.9%, respectively, after falling earlier in the day. State Bank of India, the country's biggest lender by assets, advanced 0.8% after falling by 1.9% earlier in the session.

Meanwhile, the S&P 500 Index declined overnight after Trump abruptly fired his Secretary of State Rex Tillerson and reports emerged that the U.S. President is considering imposing up to $60 billion of tariffs on Chinese goods for alleged intellectual property theft.

In Mumbai, Coal India declined 0.4% to 293.55 rupees. Citigroup downgraded the miner to 'neutral' and cut the target price on the stock to 320 rupees, saying most triggers that contributed to the company's outperformance over six months had largely played out.

Fortis Healthcare climbed 4.1%. The Economic Times reported that Malaysia's IHH Healthcare is set to launch an open offer to buy the non-promoter shares of Fortis Healthcare over the next few days.

IRB Infrastructure added 2% after the road builder emerged as a preferred bidder for two projects the India's southern state of Tamil Nadu worth 34.65 billion rupees ($534 million).

--Nimesh Vora and Vidyut Deshpande

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