(Updates to afternoon)
* Shares fall as much 1.6 pct after rising as much as 0.5 pct
* Major Asian indexes trade down 1-2 pct
* Worries over global economy, rate rise expectations hurt
MUMBAI, Aug 18 (Reuters) - Indian shares fell as much as 1.6 percent on Thursday, in tandem with weak Asian peers, dragged down by worries over the health of the global economy and on expectations domestic monetary policy will be tightened further despite risks to growth.
India’s top private sector lender ICICI Bank fell over 4 percent to lead the losses, while technology major Infosys Ltd fell over 3 percent.
At 12.21 p.m. (0651 GMT), the 30-share BSE index was down 1.6 percent at 16,567.33 points, with 24 components declining. The index had risen as much as 0.5 percent in early trade.
Major Asian indexes — Taiwan’s tech-heavy index , Japan’s Nikkei stock average and S&P stock futures ESc1 — continued to trade down 1-2 percent, tracking a fall in U.S. tech shares on Wednesday and global economic worries.
“Today, the mid cap stocks have stabilised but the large caps ones are down... Especially the banks and real estate companies. This is primarily due to the RBI (Reserve Bank of India) not giving much comfort to the sectors,” S.P. Tulsian, an independent analyst told Reuters over the telephone.
“There is a nervousness and this trend will continue till the (monthly derivative contracts) expiry happens.”
Last week, Citi cut its year-end target for India’s benchmark index by nearly 10 percent to 19,700 from 21,500, citing weak market environment, heightened uncertainty and lower earnings.
Cautious foreign funds have turned net sellers of local equities this month — offloading $1.4 billion of shares — after buying a net $1.7 billion worth of shares in July.
“The market is down on global cues and a fear that the RBI might raise the rates, which would affect the industry growth,” R.K. Gupta, managing director, Taurus Mutual Fund, said
Shares would continue to under perform for another week or so unless there is some unexpected change in the overcall scenario, he said.
“Sectors like information technology, banks and real estate have taken the highest hit and they would bounce back over next four-five months once the markets improve,” he said suggesting the better sectors for investment.
The country’s largest lender State Bank of India’s shares fell over 2.7 percent to 2,110 rupees, while ICICI Bank fell 4.82 percent to 865.90 rupees.
The banking index has fallen over 9 percent in 2011 as investors fretted over growth prospects after the RBI raised interest rates 11 times since March 2010.
Infosys Technologies fell 3.83 percent to 2,355 rupees on Thursday, while India’s information technology index has lost 27.2 percent so far this year.
U.S. tech shares fell on Wednesday after Dell’s disappointing sales outlook fanned worries weak economic growth will hurt earnings in the third quarter.
India’s showcase $76 billion software and services sector, which has already been reeling under competitive pressure and sluggish demand, counts the United States and Europe as its two biggest markets.
Shares in Idea Cellular rose over 1 percent after Malaysia’s Axiata bought 0.9 percent more in India’s fourth-biggest mobile carrier, raising its holding to about 20 percent.
On Wednesday, the world’s largest coal miner Coal India toppled energy major Reliance Industries to become the country’s most valuable firm at more than $55 billion.
The 50-share NSE index was down 1.58 percent at 4,976.8 points.
In the broader market, 961 declines outnumbered advances on volume of 344 million shares, while the total volume was 193.35 million.
* Shares in Educomp Solutions fell over 12 percent after reports that income tax officials conducted searches at its premises in New Delhi and Gurgaon were, two traders said.
* Shares in Jet Airways rose over 2.5 percent after a top official said it aimed to increase domestic low-fare capacity to 80-85 percent of total fleet from 72 percent currently.
* Shares in Sadbhav Engineering rose over 2.5 percent after it won an order worth 2.02 billion rupees.
* K S Oil at 30.07 million shares
* Suzlon Energy at 15.6 million shares
* Unitech 11.39 million shares
FACTORS TO WATCH * For technical analysis click on www.reuterstechnicals.net * Indian rupee report * Indian bond report * Common bond setback saps euro; Swiss meeting eyed * Brent crude rises, above $109 on U.S. gasoline draw * Euro wobbles after summit let-down; Asia techs down
* Sarkozy, Merkel plan fails to inspire Wall St * For closing rates of Indian ADRs
(Reporting by Kaustubh Kulkarni; Editing by Aradhana Aravindan)
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