Indian shares fall 2.44 percent on capital control fears

MUMBAI, Oct 19, 2007 (AFP) – Indian share prices slid 2.44 percent in volatile trade on Friday as investors chose to unwind positions fearing sharper falls on concerns over capital flow controls, dealers said. They said the markets could drop further until clarity emerges on a regulatory proposal to curb capital flows into India.

The benchmark Sensex index fell 438.41 points to close at 17,559.98, off the day’s low of 17,226.18.

Trading was halted on Wednesday as indices plunged more than nine percent but recovered to close down 1.76 percent after officials moved to reassure investors.

“Investors’ nerves are still rattled. We expect the markets to remain choppy on low volumes until clarity on the P-note proposal comes through,” said a dealer with brokerage ULJK Securities.

Capital goods, metal, banking and property stocks all suffered.

The proposed regulatory change, issued late Tuesday, concerns participatory notes or P-notes, which allow overseas investors to gain exposure to Indian stocks anonymously.

Dealers said the expiry of the monthly derivatives contract next week is likely to cause a further sell-off.

Losers led gainers 2,186 to 548 on volume of 96.11 billion rupe