MUMBAI: Indian markets eased for a second day on Thursday as risk appetite waned on slowing growth concerns and accelerating food inflation meant more upward pressure on interest rates.
Data showed car sales in India rose 7 percent in May, their slowest pace of growth in two years, and analysts expect a further decline in momentum as higher fuel prices, interest rates and vehicle costs crimp demand.
The food price index rose an annual 9.01 percent in week to May 28, government data showed on Thursday, up from 8.06 percent in the previous week.
Financials led the losses as the data comes ahead of the central bank's policy review on June 16, when it is expected to raise rates for the 10th time in 15 months.
The 30-share BSE index slipped 0.05 percent or 9.39 points to 18,384.90, with 19 components closing in the red.
"The market is in a state of limbo. It does not have any trigger right now," said Gajendra Nagpal, CEO of Unicon Financial.
The 50-share NSE index fell 0.1 percent to 5,521.05. Declining shares beat advancing ones in the ratio of 1.3 to 1 on a volume of 436 million shares on the NSE, lower than its 90-day average daily volume of 616 million shares .
State-run refiners
Indian Oil Corp ,
Bharat Petroleum and Hindustan Petroleum fell by nearly 1 to 2.4 percent after sources said on Wednesday the government had again deferred a decision on raising prices of diesel, kerosene and cooking gas.
"If government does not raise prices it is not sustainable for us. We were hoping that OPEC will raise output but that has not happened so we are in a difficult position," said R.K. Singh, chairman of BPCL.
"The government has to either raise prices or give us higher compensation. Our borrowings are rising by 20-25 billion rupees a month. It will be difficult to sustain."
Leading lender
State Bank of India shed 1.4 percent, while rival
ICICI Bank dropped 0.1 percent.
HDFC Bank bucked the trend and closed 0.3 percent higher.
Richard Bernstein, a leading market strategist, told a Reuters 2011 Investment Outlook Summit in New York on Wednesday emerging markets face "monstrous" risks this year due to intensifying inflationary pressures and credit bubbles.
Top car maker Maruti Suzuki and
Tata Motors lost 0.7 percent each on slowing growth outlook. "Earnings are already behind us, and sluggish global markets are hurting," Nagpal said.
World stocks, as measured by the MSCI world equity index , fell 0.1 percent by 1017 GMT, while emerging market stocks dropped 0.5 percent.
"Risk appetite is coming off on worries about a slowdown globally. Also, on the domestic front the usual culprits --inflation and rising interest rates continue to hurt," said Vaibhav Sanghavi, director of Ambit Capital.
