Sensex falls over 200 points, ignores Fitch upgrade, Chidambaram pledge

By Abhishek Vishnoi

MUMBAI (Reuters) - The BSE Sensex, Nifty fell for a third consecutive session on Thursday to close at their lowest level since April 17, after Apollo Tyres slumped as its $2.5 billion acquisition of Cooper Tire raised concerns about debt levels, while Sun Pharma fell after settling a patent suit with Pfizer for $550 million.

Shares also slid after Japanese stocks plunged over 6 percent to bear market territory and Asian shares slid to nine-month lows on Thursday, as investors rushed for the exits as the prospect of reduced stimulus from central banks roiled markets.

Fears of foreign institutional investors (FIIs) paring positions and the RBI halting the rate cut cycle were so strong that shares didn't react despite the finance minister pledging more reforms and Fitch surprisingly returning India to 'stable' outlook.

 

Dealers now await the May headline inflation data due on Friday, which is the last crucial data before the central bank's rate meet on Monday.

"If global markets and RBI announcements are supportive then we may seen a corrective rally soon," said Paras Adenwala, managing director and principal portfolio manager at Capital Portfolio Advisors.

"Clearly, the medium term bias is down but for the sentiment to change rupee needs to stabilise."

The BSE Sensex fell 1.12 percent, or 213.97 points, to end at 18,827.16.

The Nifty fell 1.06 percent, or 61.10 points, to end at 5,699.10, closing above the psychologically important 5,700 level.

The headline inflation probably held near the RBI's comfort level of 5 percent last month, giving it room to ease policy, as commodity, food and fuel costs remained moderate, a Reuters poll found.

A tumbling rupee and pressure on the current account deficit are also likely to prevent the central bank from lowering policy rates on Monday despite softening inflation and decade-low economic growth, a Reuters poll showed.

Shares in Apollo Tyres Ltd fell 25.5 percent after a $2.5 billion deal to buy U.S.-based Cooper Tire & Rubber Co raised concerns about the company's debt.

Apollo will fully fund the purchase through new debt, raising the post-acquisition leverage for the combined entity to 3.8 times net debt/EBITDA (earnings before interest, tax, depreciation and amortisation) from 1.4 times now, according to analysts' estimates.

Sun Pharmaceutical Industries Ltd fell 3.2 percent after the company settled a patent suit with Pfizer Inc related to its acid-reflux drug for $550 million.

Lenders further lost ground as high retail inflation in May was seen virtually shutting the door on a rate cut next week, especially after a sliding rupee reignited current account deficit concerns.

ICICI Bank Ltd fell 1.2 percent while HDFC Bank Ltd ended 1.3 percent lower.

Tata Motors Ltd fell 3.6 percent on fears of weak sales at unit Jaguar Land Rover, expected later in the week.

However, among stocks that gained, Titan Industries Ltd shares rose 4.5 percent after Wednesday's slump of 13.76 percent on concerns about recent measures to curb gold imports was seen as overdone.

(Editing by Sunil Nair)