High oil price drags Indian shares and rupee down
Pakistan Times Business & Commerce Desk

MUMBAI (India): Indian shares slid further on Friday as firm crude oil prices weighed on markets across the region and investors wary of a correction kept selling after the index hit a new high the previous day.

The rupee fell to a new one-week low as oil importers, anxious about the crude price, stepped up dollar purchases, while federal bonds ended steady despite low weekly inflation as traders digest fresh supplies.

The top 30-share Bombay stock index fell 0.39 per cent to 7,780.76 points in choppy trade. The index, up nearly 18 per cent this year, has gained 16 per cent since the start of June, prompting analysts and market officials to advise caution.

Talk of a technical forecast from an international brokerage for a correction of more than 10 per cent had rattled some investors on Thursday, when the index slid 0.6 per cent.

“A correction was due, but foreign fund flows continue to be strong, so a little bit of selling by domestic funds and retail investors is not going to have much of an impact,” said Biji Mathew, an institutional sales dealer at Pioneer Intermediaries.

Foreign funds have moved $7.3 billion into stocks this year. Regional markets were weaker on worries about oil prices, which have bounced back above $64 a barrel.

Crude hit a record $67.10 a week ago and US manufacturers have warned that high prices will crimp consumer spending.

State-owned firms fell on persistent worries about the pace of divestment of state holdings after the government on Tuesday shelved plans to sell stakes in 13 firms.

Bharat Heavy Electricals fell 1.7 per cent and Rashtriya Chemicals and Fertilisers lost 1.5 per cent. The rupee INRIN eased for a third straight session, weakening 0.03 per cent to close at 43.580/585 per dollar amid dollar demand from companies for month-end spending and purchases by oil firms to meet rising crude prices.

Bonds were flat as worries that high oil prices could push up local pump prices and inflation offset cheer over a lower-than-expected weekly inflation rate. The yield on the popular 7.37 per cent 2014 bond, auctioned on Thursday for 50 billion rupees, was unchanged at 7.0258 per cent.

Though annual wholesale price inflation eased to 3.35 per cent in the week to Aug. 6, analysts worry that given India’s dependence on imported oil, high crude prices could prompt the government to raise state-controlled fuel prices, accelerating inflation.●