Friday's Asia Stocks Recap

Indian stocks were hit hard Friday, particularly the banking sector, after Finance Minister Palaniappan Chidambaram encouraged lenders to slash rates for small home loans and cancel $15 billion in loans to farmers.

The wavier of loans to farmers was originally part of Chidambaram's federal budget presented to India's parliament last week. Investor sentiment in the Far East is quickly eroding as market players conclude that the government's fiscal initiatives might slow earnings growth.

"Chidambaram is trying to convince banks to lend at lower rates and boost the economy. This might lead to narrower margins if not accompanied by a fall in deposit costs," said Deven Choksey, chief executive officer of Mumbai-based K.R. Choksey Shares & Securities. The Bombay Stock Exchange's Sensex Index fell 566.56 points, or 3.42%, to 15.975.52.

Indian pharmaceutical company Dr. Reddy's Laboratories (RDY Quote) was hit with a downgrade by Citi Investment Research analyst Prashant Nair. Nair downgraded the stock from buy to hold, citing pricing pressure for Dr. Reddy's German generic business, due to regulation and a change in market dynamics. "Over the next few quarters, we expect the pain in German operations to continue and suppress overall earnings growth," said Nair. ADR shares of Dr. Reddy's fell 0.6% to $14.01. ...