GDP show spooks markets

Sensex down 612 points as govt forecasts slow FY08 growth.

The benchmark stock indices tumbled the most in two weeks, led by Reliance Industries, after the government forecast economic growth would slow as higher interest rates curb consumer spending.

FLOP SHOW

The S&P CNX Nifty slid 189.30, or 3.6 per cent, to 5,133.25

Overseas investors sold a net $528.5 million of Indian equity derivatives yesterday, according to the National Stock Exchange

India caps fuel prices to control inflation and hasn't allowed an increase in gasoline and diesel prices since June 2006

Reliance Industries, the nation's most valuable company, and Larsen & Toubro, the country's largest engineering company, fell to two-week lows. Oil companies declined after Minister Murli Deora declined to say when the Cabinet would discuss retail pump prices for gasoline and diesel.

India, Asia's third-largest economy, is expected to expand 8.7 per cent in the year to March 31, the weakest pace since 2005, according to India's statistics office. Growth was 9.6 per cent in the last financial year. The central bank has raised interest rates nine times since October 2004 to contain inflation.

"The government is not very comfortable with runaway growth,'' said Sashi Krishnan, chief investment officer at Bajaj Allianz Life Insurance Co, who oversees $3.6 billion in assets. "The government has also been looking for some time to slow growth a bit to contain inflation.''

The Bombay Stock Exchange's Sensitive Index, or Sensex, declined 612.56 points, or 3.4 percent, to 17,526.93, its steepest decline since January 22 and the biggest fluctuation among indexes included in global benchmarks.

The index had risen as much as 0.3 per cent before the growth forecast was released. All stocks on the 30-member measure fell, apart from one. The widely tracked index had fallen 2.8 per cent yesterday.

The S&P CNX Nifty slid 189.30, or 3.6 per cent, to 5,133.25. Reliance Industries slid 5 per cent to Rs 2,425, its lowest since January 22. Larsen & Toubro declined 4 per cent to Rs 3,630.45, its weakest since January 24.

Bajaj Auto, the country's second-largest motorcycle maker, dropped 2.6 per cent to Rs 2,278.70, its third straight day of declines. ICICI Bank Ltd, the nation's most valuable bank, declined 4.1 per cent to Rs 1,105.25. Hindalco Industries, the country's biggest aluminium producer, fell 5.7 per cent to Rs 163.3.

Overseas investors sold a net $528.5 million of Indian equity derivatives yesterday, according to the National Stock Exchange.

Foreign investors continued to sell in the derivatives markets today, while there was little buying by domestic institutions, said Deven Choksey, chief executive officer of Mumbai-based K R Choksey Shares & Securities.

"The local institutions are just not operating in the derivatives markets,'' said Choksey, who manages $550 million for wealthy individuals.

"I expect government institutions to step in because the market is now reasonably valued at 16 times forward earnings for March 2009.''

The issue of retail fuel prices was not on the Cabinet's agenda today, Deora told reporters in New Delhi. Deora on January 31 said the cabinet may consider revising prices this week, after it was discussed by a panel of ministers.

India caps fuel prices to control inflation and hasn't allowed an increase in gasoline and diesel prices since June 2006.

Indian Oil, the largest state-run refiner, fell 3.9 per cent to Rs 505.05. Oil & Natural Gas Corporation, India's largest explorer, declined 3.7 per cent to Rs 988.5.