INDIA STOCKS Indian shares fall nearly 2% on fears of foreign funds outflow

A broker reacts while trading at his computer terminal at a stock brokerage firm in Mumbai, India, February 1, 2020. REUTERS/Francis Mascarenhas/Files

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BENGALURU, Sept 23 (Reuters) – Indian shares fell nearly 2% on Friday on fears an aggressive US Federal Reserve would trigger foreign fund outflows, while financial stocks slid after the central bank barred Mahindra Group’s financial services arm from using third-party agents to recover loans.

The NSE Nifty 50 index (.NSEI) fell 1.72% at 17,327.35, while the S&P BSE Sensex (.BSESN) dropped 1.73% to 58,098.92.

Both the indexes fell over 1% this week and have erased gains made so far this year.

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The US Federal Reserve’s members’ projections for aggressive hikes and persistently high rates over the next year or so, unleashed another round of dollar buying that put other assets on the run.

“Because of the Fed’s move, a lot of money that was coming to emerging markets will head back,” said Saurabh Jain, assistant vice-president, research, at SMC Global Securities.

Foreign investors net sold $152 million worth of Indian equities this week as of Thursday, after buying net $819 million worth last week, Refinitiv Eikon data showed.

The Nifty bank index (.NSEBANK) fell 2.7%, while the finance index (.NIFTYFIN) dropped 2.5%.

Shares of Mahindra and Mahindra Financial Services (MMFS.NS) fell 13.1% after the Reserve Bank of India directed the company to stop using third-party services for loan recovery until further orders. read more

“This move (by RBI) will be seen as negative for the stock as well as the companies lending for vehicles. It will reduce the collection efficiencies for these companies,” said AK Prabhakar, head of research at IDBI Capital.

The Nifty bank index had gained about 19% so far this quarter and had hit a life high last week on expectations of higher credit growth.

“Banks are seeing some correction after outperforming other sectors,” Jain said, adding that there was no serious threat to growth in banks despite a difficult macro environment.

Shares of Power Grid Corporation of India (PGRD.NS) fell 8%, and was the top loser in Nifty 50 index, while Indian pharmaceutical company Divi’s Laboratories Ltd’s (DIVI.NS) was the top gainer, rising 1.8%.

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Reporting by Nallur Sethuraman and Gaurav Dogra in Bengaluru; Editing by Savio D’Souza and Neha Arora

Our Standards: The Thomson Reuters Trust Principles.

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