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ICICI Bank Drags Indian Shares Down

April 30, 2007 | REUTERS India
MUMBAI (Reuters) - Indian shares fell more than 1 percent on Monday, pulled down by ICICI Bank after its quarterly earnings fell short of market expectations and it said it would sell new shares to raise $5 billion.

Shares in ICICI Bank, India's top private sector lender, fell as much as 9.6 percent in early trade on fears of massive equity dilution and after the bank badly market forecasts by reporting a modest 4.4 percent rise in quarterly profit.

At 10:37 a.m., the 30-share benchmark BSE index was down 145.95 points, or 1.05 percent, at 13,762.63, with 18 components losing ground. The index fell 2.25 percent on Friday after a five-day run of gains had lifted it to two-month highs.

The market will be closed on Tuesday and Wednesday for holidays.

Analysts said ICICI's share sale would see an equity dilution of around 30 percent if it priced the new shares between 750-800 rupees -- they had closed at 933.65 on Friday. That could hurt the bank's return on equity and see the stock underperform the market for some months, they said.

The BSE bank index was down 4.1 percent. Banking stocks have been weighed by concerns of a slowdown in credit growth after the central bank stepped up the pace of its policy tightening since late last year.

The Reserve Bank of India (RBI) has raised lending rates five times since last June and has increased reserve requirements for banks three times since early December.

"I think the downside should be limited from this level," said V.K. Sharma, head of research at Anagram Stock Broking Ltd, who did not see ICICI shares falling below 800 rupees.

"(Chief Executive K.V.) Kamath has been very forthcoming on the slow down. Let's believe him for the time being."

In other sectors, shares in software services firms rose after the rupee eased from last week's nine-year highs to its lowest in almost a week.

Shares in Infosys rose 2.4 percent to 2,055.50 rupees, Satyam was up 2.2 percent at 477.50 rupees.

In the broader market, 1,004 gainers beat 718 losers on volume of 41.8 million shares.

The 50-issue NSE index fell 0.74 percent to 4,053.25.

Elsewhere in the region, Karachi's 100-share index slipped 0.09 percent to 12,225.81, while Colombo's All-Share index fell 0.82 percent to 2,801.40.

STOCKS ON THE MOVE:

* Software services firm Nucleus Software Exports Ltd. rose 3 percent to 999 rupees after its board approved issue of one bonus share for each share held.
* Textiles maker Raymond Ltd. fell nearly 6 percent to 337 rupees after its January-March net profit fell 35 percent to 288.4 million rupees.
* Drugs and chemicals maker Jubilant Organosys Ltd. rose 0.7 percent to 262 rupees after a senior official said the firm expects 20 percent topline growth in 2007/08. The firm posted a 47 percent rise in January-March net profit to 696 million rupees.

MAIN TOP THREE BY VOLUME:

* IFCI Ltd. on trade of 6.5 million shares.
* Tata Teleservices (Maharashtra) Ltd. on 1.8 million shares.
* Reliance Natural Resources Ltd. on nearly 1 million shares.