Mkts crash, Sensex closes 570 pts down

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Indian shares fell 4.2 per cent on Thursday, taking their losses to 15 per cent in two weeks, as record oil prices above $145 a barrel intensified inflation expectations and possibly tighter monetary policy.

No. 2 mobile operator Reliance Communications tumbled 6.9 per cent to 389.50 rupees, its lowest close in nearly 16 months, on concerns a family feud could scupper a multi-billion dollar deal with South Africa's MTN.

Shares in the firm have fallen a third since late May when it began talks with MTN to create a global top-10 telecoms firm.

Financial stocks dropped as rising interest rates were likely to slow down demand for loans and increase defaults by customers, while falling bond prices would erode the value of bank investment and result in higher provisioning.

"There is a fear in the market the repo rate may be hiked further," said Gopal Agarwal, head of equity at the Indian fund unit of Mira Asset, referring to the central bank's key short-term lending rate.

Last month, the central bank had raised its key repo rate twice by a total of 75 basis points to rein in galloping inflation.

Traders said political concerns also kept investors edgy, with the government wooing a regional party for support if the communists withdrew their parliamentary votes in protest against a civilian nuclear deal with the United States.

The 30-share BSE index ended down 4.18 per cent, or 570.51 points, at 13,094.11, after falling as much as 5.3 per cent during trade, with 28 components in the red.

The benchmark is down 35.5 per cent this year.

In the broader market, 749 losers led 1,872 gainers on volume of 359 million shares.

Banks led the fall with the No. 2 lender ICICI Bank shedding 7.9 per cent to 573.85 rupees, its lowest close in nearly two years.

Morgan Stanley said in a research note that bond and equity losses would squeeze profits of banks and forecast ICICI's earnings per share would fall by a fifth in the June quarter.

The BSE Bank index fell 4.6 per cent. Leading mortgage lender Housing Development Finance Corp dropped 5 per cent to 1,935.50 rupees, its lowest close since Aug. 23, 2007.

Oil, India's biggest import, hit records for the fifth time in six sessions, as the dollar fell on a gloomy US jobs data, while a higher that expected fall in US crude stocks raised supply concerns.