Weak world equities dragged Indian stocks 0.8 percent lower on Wednesday, but Tata Motors' rally on upbeat assessment by brokerages a day after its forecast-beating quarterly results contained losses.
Vehicles maker Tata Motors, which also makes the ultra-cheap car Nano, rose as much as 6.9 percent to 1,023.55 rupees, the most in at least two decades, data from Thomson Reuters showed.
Edelweiss raised Tata Motors to "buy" from "reduce", while Citi Investments Research raised the target price on the stock to 1,197 rupees from 947 rupees per share.
Bank of America-Merrill Lynch raised its price objective on Tata Motors to 1,100 rupees from 924 rupees, while reiterating a buy rating, a note seen by Reuters showed.
The 30-share BSE index shed 0.82 percent or 149.80 points to 18,070.19, with 24 of its components losing ground.
"Tata Motors saved the markets from a steep fall today. But, the stock has run up a lot after the earnings upgrades from brokerages," said Vaibhav Sanghavi, director of Ambit Capital. "The scene globally is not going to improve overnight.
It is going to be a gradual process and stimulus has to be kept on." Foreign funds have invested a net $11.2 billion in Indian equities so far this year, including in the primary market, having pumped in a record $17.5 billion in 2009, which drove the benchmark index 81 percent higher.
"India is in a sweet spot currently, with the economic growth and reforms. So, there is no danger of a steep downside," Sanghavi added.
Shares in Bharti Airtel, India's top mobile operator, dropped 1.4 percent after see-sawing as it reported a 32 percent fall in quarterly profit, including its African operations which it acquired in June in a $9 billion deal.
"It will be some more time until more clarity emerges (for the telecoms sector). Telecom stocks are best avoided at this point in time," said Sanghavi.
Financials led the losses, hurt by weak broader market, dealers said.
Top lender State Bank of India dropped 1.1 percent while leading private lenders ICICI Bank and HDFC Bank shed 1.8 percent and 0.6 percent respectively.
Mortgage lender Housing Development Finance Corp declined 2.4 percent.
Aluminium maker Hindalco rose 0.3 percent as its unit Novelic Inc said on Tuesday it sees current strong demand for flat-rolled aluminum products continuing into its fiscal second quarter and beyond.
Tata Steel, world's seventh-largest steelmaker by output, dropped 3.2 percent ahead of its quarterly earnings announcement on Thursday.
Cigarette-to-hotel business ITC was down 1.5 percent after the recent rise in the stock. The stock has risen more than 23 percent so far in 2010, riding on the domestic consumption story.
In the broader market, losers outnumbered gainers in a ratio of 1.5:1 in a relatively moderate volume of 450 million shares.
The 50-share NSE index declined 0.7 percent to 5,420.60 points.
World stocks hit a 1-½ week trough after the Federal Reserve's assessment of the U.S. economy turned more pessimistic.
The MSCI world equity index was down 0.9 percent while the Thomson Reuters global stock index shed 1.2 percent.
STOCKS THAT MOVED
Software services firm Educomp Solutions tumbled 9.8 percent to 622.40 rupees, as its June-quarter earnings disappointed, dealers said. After market hours on Tuesday, it said April-June net profit rose 22 percent.
Bharati Shipyard declined 4 percent to 236.15 rupees, as the second-largest private shipbuilder said its April-June net profit dropped 40.6 percent.
MAIN TOP THREE BY VOLUME
IFCI on 15 million shares
Karuturi Global on 12.6 million shares
Shree Ashtavinayak on nearly 9 million shares