Sensex drops 2 pct on global rout; Videocon up

The BSE Sensex fell 2 percent on Thursday as investors took fright after a grim economic warning by the Federal Reserve for the U.S. economy sent markets across the world sliding.

Banks, export-driven software services companies such as Infosys and truck and car maker Tata Motors were among the big losers.

Gajendra Nagpal, chief executive of Unicon Financial Intermediaries, said investor confidence was dented after U.S. stocks suffered their worst drop in a month on Fed comments there were "significant downside risks" to the economy even as it took another stab at boosting growth.

"If Europe also falls, then we might see further selling," he said.

Videocon Industries bucked the trend and rose as much as 3 percent after the energy unit of the consumer electronics maker announced a discovery of oil and gas in Brazil.

At 10:55 a.m. (0525 GMT), the 30-share BSE index was down 1.96 percent at 16,730.6 points, with all its components in the red.

The broader 50-share NSE index was down 2 percent at 5,030.7 points.

Leading lender State Bank of India and rival ICICI Bank fell more than 2 percent each, while Tata Motors shed 3.8 percent and DLF dropped 3.4 percent.

K.K. Mital, head of portfolio management at Globe Capital, said a combination of factors from delays in government decision making to rising domestic interest rates were weighing on the market.

"There are concerns on slowing of policies ... and a continuous hawkish view on inflation and interest rates, which may have an impact on corporate earnings," he said.

The Reserve Bank of India had raised rates last week for the 12th time in 18 months and warned fighting stubbornly high inflation remained its priority even as economic growth was slowing.

Top software services exporter Tata Consultancy Services fell 1.5 percent and Infosys was down 1.1 percent, after rising over the past 3 days on the back of a sharp slide in the rupee.

The MSCI's measure of Asian markets other than Japan was down 4.4 percent, while Japan's Nikkei fell 2 percent.

STOCKS ON THE MOVE

* Astral Poly Technik rose as much as 20 percent after the company said it was in preliminary talks with U.S. based Lubrizol Corp to set up a chlorinated poly vinyl chloride making plant.

* Pantaloon Retail fell more than 4 percent, erasing the gains made in the previous session on a report the Future Group, which owns the retailer, was in talks with Japan's Lawson to sell a 49 percent stake in its food sourcing and manufacturing operations.

TOP 3 BY VOLUME

* Suzlon Energy on 4.34 million shares

* Tata Motors on 3.09 million shares

* Jaiprakash Associates on 2.83 million shares

(Reporting by Kaustubh Kulkarni; Editing by Ranjit Gangadharan)