Nov. 10 (Bloomberg) -- India’s stocks fell for the first time in five days after Finance Minister Pranab Mukherjee raised concern that domestic demand is still needed to support the economy when he said fiscal stimulus measures will be withdrawn.

Maruti Suzuki India Ltd., the maker of half the cars sold in India, slid 2.6 percent after Mukherjee said the government will take “corrective” steps and pull back fiscal stimuli once economic recovery takes hold, stressing the need to cut the budget deficit. Hindalco Industries Ltd., the biggest aluminum producer, fell 2.3 percent on a slide in the price of the metal on the London Metal Exchange.

“The finance minister’s comment shows that domestic demand is not as robust as it was earlier thought,” said R.K. Gupta, who helps oversee the equivalent of $387 million at Taurus Asset Management Ltd. in New Delhi. “The biggest concern is the rising prices of essential commodities, which is suppressing domestic demand.”

The Bombay Stock Exchange’s Sensitive Index, or Sensex, dropped 58.16, or 0.4 percent, to 16,440.56. The gauge had risen 7.1 percent in the previous four trading sessions.

The S&P CNX Nifty Index on the National Stock Exchange declined 0.3 percent to 4,881.70. The BSE 200 Index fell 0.2 percent to 2,050.39.

Maruti fell 2.6 percent to 1,445.55 rupees. New Delhi-based Maruti Suzuki, whose profit almost doubled last quarter, is among consumer companies that have benefited from the injection of 5.85 trillion rupees ($124 billion) of cash since September 2008 to sustain credit to companies and households.

Withrawing Stimulus

“Fiscal consolidation is imperative,” Mukherjee told the India Economic Summit organized by the World Economic Forum in New Delhi today. He said fiscal stimulus will be withdrawn in “due course,” two days after Prime Minister Manmohan Singh said it will be done next year.

Hindalco fell 2.3 percent to 126.5 rupees. Aluminum fell 0.4 percent to $1,945 a ton on the London Metal Exchange.

Stocks in the South Asian nation are trading at about 17 times estimated earnings, the higher end of its historical range, Rahul Chadha, Mirae Asset Global Investment’s head of Indian equities, said in an interview with Bloomberg Television in Hong Kong said. Further gains of between 10 percent and 15 percent could leave shares “vulnerable to correction” in the near term, he added.

‘Priced for Perfection’

“We’re priced for perfection,” Chadha said. “We have inflation, which will be in high single digits probably by March next year. We have government withdrawing part of the stimulus in February in the union budget. That may just act as some dampener for markets.”

India’s government may start withdrawing some of the excise duty cuts introduced early next year, Chadha said. Prime Minister Manmohan Singh said on Nov. 8 that he sees clear signs of an “upturn” in the economy and that the government plans to “take appropriate action next year” to wind down the stimulus measures.

Separately, Moody’s Investors Service said India’s sovereign rating won’t be raised unless the government works toward reducing its budget deficit and debt.

Higher borrowing by the government is expected to widen the budget deficit to a 16-year high of 6.8 percent of gross domestic product in the 12 months to March 2010, according to the finance ministry.

Overseas funds bought a net 6.96 billion rupees ($148.17 million) of Indian stocks Nov. 6, the Securities and Exchange Board of India said on its Web site. The funds have bought 691.1 billion rupees of Indian stocks this year to date, compared with record net sales of 530 billion rupees for the whole of 2008.

The following were among the most active on the exchange:

Reliance Industries Ltd. (RIL IN), India’s most valuable company, gained 1.5 percent to 2,054.5 rupees after it found oil in a block in the Cambay basin in the western state of Gujarat.

The shares also climbed after the Daily News & Analysis reported the billionaire Ambani brothers met in Mumbai to discuss their disagreement over gas supplies. Manoj Warrier, a spokesman for Reliance Industries, declined to comment, while Reliance Natural Resources said rumors of an out-of-court settlement are “completely baseless and speculative.” Reliance Natural Resources Ltd., owned by Anil Ambani, advanced 1.7 percent to 73.4 rupees.

NMDC Ltd. (NMDC IN), the nation’s largest iron-ore producer, jumped 20 percent to 432.2 rupees after the steel ministry said it will initiate next month a plan to sell a stake in the company.

The government, which owns 98.38 percent of NMDC, aims to sell an 8.38 percent stake as part of a plan to cut holdings in its profitable companies to 90 percent. The stake sale in Hyderabad-based NMDC will fetch as much as 130 billion rupees at current prices, the steel ministry said in its statement yesterday.

ICICI Bank (ICICIBC IN), the country’s second-biggest lender, added 0.9 percent to 896.55 rupees after its rating was upgraded to “outperform” at Reliance Equities International Pvt., which said the company may report annual profit growth of 18 percent from fiscal 2009 through 2011.

LIC Housing Finance Ltd. (LICHF IN), the mortgage lender controlled by India’s biggest life insurer, fell 1.5 percent to 879.05 rupees after it was rated “sell” in new coverage at Citigroup Inc., which said investors should “lock in gains” given a possible peak in growth, profitability and valuations. The stock gained 10 percent to 892.3 rupees.

To contact the reporter on this story: Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net.

Last Updated: November 10, 2009 06:10 EST