MUMBAI (NewsRise) -- Indian shares suffered their worst weekly fall in 18 months, dragged by weak earnings from index heavyweights such as Tata Motors, amid sagging demand for risk assets in the wake of rising geopolitical tensions across the region.
The benchmark BSE Sensex fell 3.4%, its first weekly loss in six, to 31,213.59, while the broader Nifty 50 declined 3.5%%. Both the indices fell the most since the week ended Feb. 12, 2016. On Friday, the Sensex and the Nifty closed down more than 1%, led by State Bank of India. Tata Motors lost 14% for the week after several brokerages reduced their price targets on the stock after disappointing April-June earnings.
Regional markets too suffered a slump this week, with the Nikkei Asia300 Index falling 2.6% after U.S. President Donald Trump's warnings to North Korea were met with further threats from the isolated state. Earlier this week, Trump said North Korea's threats would be met with "fire and fury," following which Pyongyang detailed plans to launch missiles into waters near the U.S. territory of Guam.
"Markets are on a free-fall mode on the back of North Korea and U.S. geopolitical tensions. Weak earnings from large-cap companies and the market regulator's crackdown on shell companies further added to the negative sentiment at home," said Akash Jain, vice president, equity research at Ajcon Global Services. "The markets may see a fall of about 1% more, but once the geopolitical issues ease, the indices may see some bounce back."
The Securities and Exchange Board of India, the nation's capital markets watchdog, on Monday issued a circular to the stock exchanges to halt trading in 331 companies that it suspected are shell companies. This hampered investor sentiment, especially in the mid- and small-cap companies, analysts say.
Meanwhile, India kept its fiscal year economic growth estimate unchanged at between 6.75% and 7.5% in its second part of the annual Economic Survey, but cited 'downside risks' to the projection due to hefty farm loan waivers announced by several states.
Farm loan waivers across the country could touch 2.7 trillion rupees ($42.1 billion) and could erode economic demand by up to 0.7% of gross domestic product, according to the survey that was prepared by the Chief Economic Adviser and submitted in parliament. It may impart a 'significant deflationary shock' to the economy, the survey said.
Pharma stocks were among the other key losers for the week after weak quarterly earnings and increased regulatory concerns. Dr. Reddy's Laboratories fell 10.4%. The company Thursday received a non-compliance order from the Regulatory of Authority of Germany for its Hyderabad plant. Pending revocation of the order the plant will not be allowed any dispatches to the European Union.
Sun Pharmaceutical Industries fell nearly 11% during the week. After market hours on Friday, the company reported a surprise net loss of 4.25 billion rupees in the June quarter due to a one-time litigation charge in the U.S.
Friday, lenders fell sharply after State Bank of India, the country's largest, reported increased loan slippages in the quarter. SBI lost 5.4%, its biggest decline in almost nine months. Union Bank of India fell 5.2% after it reported a 30% on-year decline in June quarter profit, while rival Oriental Bank of Commerce finished 7.1% lower as it swung to a net loss in the period.
Copper and aluminium producer Hindalco Industries fell 7.2% on Friday after first-quarter standalone net profit came in below analyst expectations.
--Dhanya Ann Thoppil