Nifty, Sensex dip as crude surge seen hurting economy

Indian shares edged lower for a second straight session on Tuesday on fears that a surge in crude prices following attacks on Saudi oil facilities could hurt the economy further.

Energy stocks were down in early trading, even as oil prices shed some of their massive gains on Tuesday after the United States flagged the possible release of crude reserves.

The broader NSE Nifty was down 0.28 per cent at 10,972.45 as of 0419 GMT, while the benchmark BSE Sensex was 0.3 per cent lower at 37,013.09. The rupee weakened 0.22 pe cent to 71.76 against the dollar.

Investors in other Asian markets were also on the sidelines ahead of an expected interest rate cut from the U.S. Federal Reserve on Wednesday.

With the threat of military action over the attacks keeping crude prices elevated, emerging markets such as India - the world`s third-biggest importer of oil - will remain under pressure.

India`s current account and fiscal deficit could take a hit if oil prices continue to rise after the attack, central bank chief Shaktikanta Das said on Monday.

"The jump in crude could affect recovery in the economy, which is hurting from a growth slowdown," said AK Prabhakar, head of research at IDBI Capital in Mumbai.

Oil marketers extended losses to a second day, with Indian Oil Corporation Ltd and Bharat Petroleum Corporation Ltd shedding 1.4 per cent-2.1 per cent.

Indiabulls Housing Finance Ltd slid 3.4 per cent on a report that the central bank had intensified its checks on the mortgage lender and Lakshmi Vilas Bank, which plan to merge, after fresh accusations of wrongdoing and the sudden exit of the bank`s chief executive officer. Lakshmi Vilas Bank shares fell 4.4 per cent.

Trading companies MMTC Ltd and State Trading Corporation of India Ltd plunged between 17 per cent and 18 per cent after a newspaper reported that the government was planning to shut down the companies.

The Nifty IT index, which tracks software companies, fell 0.7 per cent.

Meanwhile, miner Vedanta Ltd climbed 2.5 per cent to its highest in nearly seven weeks, and was the top gainer on both indexes.