Indian share prices have lost ground after investors responded to the central government’s decision to suspend privatisation of state firms. The government announced on Thursday that the privatisation of all state-run companies was on hold following opposition from a key coalition ally.

The Sensex of the Bombay Stock Exchange fell by 258.44 points, or 2.4%, to close the day at 10509.53.

The government had been planning to sell shares in two state-run companies.

The government had hoped to raise about $500m (£272m) by selling its stake in power company Neyveli Lignite Corp and aluminium manufacturer National Aluminium Company Limited (NALCO).

Shares in both companies fell during Friday’s trading.

Most heavyweight firms also saw their share prices decline, including software major Infosys, pharmaceutical giant Cipla and consumer goods giant Hindustan Lever.

Politics of privatisation

The director of Ashwin Chinubhai brokerage, Anand Dalal, told the BBC that investors wanted to pull out their money from the markets before the weekend.

He said they were worried that political developments, if any, could adversely affect their investments.

However, some experts feel the markets will not be heavily impacted by the government’s privatisation plans.

On Thursday, the regional DMK party - a key ally of the Congress-led ruling coalition at the centre - had threatened to withdraw its support if the government proceeded with its plan of selling its shares in the companies.