Indian shares fell on Tuesday in line with weakness in broader Asia and after the outcome of the central bank board's meet to boost lending failed to impress investors, amid expectations the implementation of the proposed measures will take time.
In its first meeting since the extent of a deep rift between the central bank and the government became public, the Reserve Bank of India (RBI) said on Monday its board would support small businesses and give banks more time to step up capital norms. It has also decided to form an expert committee to look into whether RBI reserves are adequate.
The Narendra Modi-led government is concerned that low crop prices and difficulties small businesses face in borrowing may dent its prospects in numerous state elections over coming weeks, and a nationwide election due by May next year.
"Market had built up that the meeting will go smoothly. But, what has come out is something that will take time to materialise and market always wants immediate action," said AK Prabhakar, head of research at IDBI Capital.
"It is not an immediate solution that will help the market. It is a long-term process. It will happen but will happen at its own speed."
The broader NSE Nifty fell 0.51 per cent to 10,708.05 as of 11:15 am, while the benchmark BSE Sensex slipped 0.39 per cent to 35,634.52.
"Now, there are fresh fears of a slowdown globally, due to impending Brexit, trade war. All these worries have come back," Prabhakar said.
Asian stock markets slipped on Tuesday, extending sharp overnight losses on Wall Street as technology firms lost on worries about slackening demand. MSCI's broadest index of Asia-Pacific shares outside Japan was largely flat.
State-run lenders weakened, with Nifty PSU bank index down as much as 1.7 per cent. Shares of State Bank of India lost up to 1.7 per cent, while Oriental Bank of Commerce Ltd's stock fell as much as 5.7 per cent.
Yes Bank Ltd was the top loser on the NSE index after its non-executive and independent director Rentala Chandrashekhar resigned on Monday, in addition to a slew of resignations from its board in last few weeks.
The stock fell as much as 6.5 per cent.
A stronger rupee hurt domestic software services exporters such as Infosys Ltd and Tech Mahindra Ltd, who bill clients in dollars.
Indian rupee rose in early trade after the RBI board meet outcome removed uncertainty over a growing rift over policy decisions between the government and the apex bank.
Nifty IT index fell 1.8 per cent, while shares of Infosys and Tech Mahindra declined as much as 1 and 3.6 per cent, respectively.