Indian shares eked out modest gains in choppy trade on Thursday, but financial stocks led by SKS Microfinance fell on a state crackdown on collection practices by lenders to the poor.
Shares in mobile operator Reliance Communications and developer Unitech dropped sharply roiled by uncertainty stemming from a possible probe into 2G spectrum allocation, that a government audit says was awarded too cheaply.
Bharti Airtel climbed 3.8 percent to 324.90 rupees after the top mobile operator said it was on track to roll out 3G wireless services by the end of this year and its chairman was optimistic about the high-margin offering.
The 30-share BSE index ended up 0.33 percent, or 65.5 points, at 19,930.64, with 19 of its components advancing.
The benchmark, which had dropped 2.2 percent in the previous session, seesawed through the day falling as much as 1.3 percent at one stage.
SKS tumbled 20 percent after the country's leading lender to tiny businesses warned a collections ordinance enacted last month in Andhra Pradesh state, the heart of India's microfinance sector, could hurt profits.
Leading lenders State Bank of India and ICICI Bank shed 0.6 percent and 3.1 percent respectively on worries about their exposure to the microfinance sector, which has come under increased scrutiny.
"There are concerns that the NPAs of the banks may go up in the near future on growing troubles in the microfinance sector," said K.K. Mital, head of portfolio management services at Globe Capital in New Delhi, referring to non-performing assets or bad loans.
Axis Bank closed down 2.7 percent at 1,426.9 rupees, erasing gains of 2.8 percent in the opening deals, with some traders saying its $456 million deal to buy investment banking and broking units of Enam Securities was expensive.
Shares in Reliance Communications and developer Unitech fell as much as 10 percent after the mobile phone industry was beset by a fresh wave of regulatory uncertainty stemming from a possible probe into 2G spectrum that a government audit says was awarded too cheaply.
The scandal prompted the resignation of Telecom Minister Andimuthu Raja and will see the country's prime minister replying to the Supreme Court's criticism over his failure to probe the scandal.
Reliance Communications and Unitech, which has a telecoms joint venture with Norway's Telenor, have said they had complied with the rules.
Reliance ended down 4.9 percent at 153.90 rupees while Unitech lost 4.2 percent to close at 71.20 rupees.
Traders said the BSE index, among the best performers in emerging markets this year, was likely to stabilise after a bout of profit-taking.