New Zealand shares dropped more than 1 per cent for the second day running, with Heartland Bank, Xero and Sky Network Television leading the decline.

The S&P/NZX50 Index fell 73.86 points, or 1.02 per cent, to 7,197.3. Within the index, 35 stocks declined, eight were unchanged, and 7 rose. Turnover was moderate at $163.3 million.

"Everyone's been talking about this equity-yield unwind, but I think it's a little bit more than that now - it's really a sell New Zealand story, by the feel of it," Rickey Ward, NZ equity manager at JBWere, said. "We have been a market that has delivered pretty good returns, and it almost feels like offshore investors - maybe domestic too - have accepted we've been trading on pretty lofty multiples and yield has been a trigger point to say let's book some profits.

"Our market has been an outperformer for five years plus, all the leaders have been sold - yes they have a yield tilt to them, but they are foreign-owned, and it really does feel like foreign investors are exiting or reducing their exposure to a market that has performed pretty well," Ward said.

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Heartland Bank led the index lower, down 2.7 per cent to $1.46. Xero dropped 2.5 per cent to $19.35, Sky Network Television fell 2.4 per cent for $4.85, and Z Energy declined 2.3 per cent to $8.01.

Tegel Group Holdings declined 1.3 per cent to $1.50. The shares have dropped in the past three weeks as Ingham Group, the largest chicken processor in Australia and the second-largest in New Zealand, heads for an initial public offering and ASX listing. The poultry group was taken public by private equity firm Affinity Equity Partners in May this year, and listed at $1.55, rising as high as $1.78 in August.

"Inghams are telling you it's a pretty soggy environment at the moment. There's an excess supply of poultry and prices are down quite heavily, so the only way to address that is if one or both start to change production to meet natural demand," Ward said. "There's no real incentive for anyone to pay up for anything at the moment when that's the backdrop. It's testing its listing price at the moment, so now people have to make a decision about whether to back the name. History will tell you if it weakens a bit further, you get capitulation because people get a bit nervous."

A2 Milk Co was the best performer, up 2.1 per cent to $1.93.

"The Australians do like that. There's a bit of a transition going on from income to growth stocks so it could well be a candidate that's benefitting from that change in thematic," Ward said.

New Zealand Refining Co rose 1.6 per cent to $2.49 and Freightways gained 0.5 per cent to $6.64.

Outside the benchmark index, ERoad bounced 19 per cent to $1.82 after the logistics and fleet management company said its stock price didn't reflect the underlying value of the business. The Auckland-based company's stock hit $1.45 yesterday, the lowest since the shares first publicly traded on the bourse at $3.32 in August 2014, after being sold to investors at $3 apiece.

Wellington Merchants was unchanged at $3.40. Ron Brierley's Mercantile NZ has crossed the 90 per cent threshold in its takeover bid for the company, formerly known as Kirkcaldie & Stains, triggering provisions to mop up the remaining shares.