Indian Stocks Tumble to Two-Year Low on Global Slowdown, Rupee
Indian stocks sank to their lowest level in more than two years amid concern a global economic slowdown and a depreciating rupee will lower earnings already threatened by high borrowing costs.
Reliance Industries Ltd. (RIL), India’s most valuable company, declined 2.7 percent. Infosys Ltd. (INFO), the second-largest software exporter that gets 98 percent of its sales from abroad, fell 2.6 percent. Hindalco Industries Ltd. (HNDL), an aluminum producer that controls U.S.-based Novelis Inc., slid 2.1 percent.
The BSE India Sensitive Index (SENSEX), or Sensex, lost 2.3 percent to 15,699.97 at the 3:30 p.m. close in Mumbai, its lowest level since Nov. 3, 2009. The rupee dropped to a record yesterday, increasing the cost of imported oil and other commodities and forcing companies with foreign currency debt dues to repay the loans at higher costs.
“Many companies raised foreign currency borrowings in the hope that interest rates overseas are lower and the rupee will remain stable, but that hasn’t worked out because of the steep depreciation in the rupee,” Sanjeev Prasad, executive director and co-head of institutional equities at Kotak Institutional Equities, told Bloomberg UTV. “Companies will have to pay back more in rupee terms” when the debts mature, he said.
As many as 25 of 28 companies in the BSE-500 Index with foreign currency bonds maturing by March 31, 2013, will face redemption, translating into a 330-billion rupee ($6.3 billion) cash outflow, Edelweiss Securities Ltd. said in a note today.
The Sensex has plunged 23 percent this year as the falling rupee has combined with a slowdown in the $1.7 trillion economy to erode profits. The central bank has lifted interest rates 13 times since last March to cool inflation that has stayed above 9 percent for 11 straight months. Last month, it cut its growth forecast to 7.6 percent from 8 percent.
Foreigners Sell
Today’s slump was caused by substantial withdrawals by foreign investors and a weak rupee, Finance Minister Pranab Mukherjee said in New Delhi. It will be a difficult period for the nation’s markets until the euro zone stabilizes, he said.
Overseas investors sold a net 6 billion rupees of Indian stocks on Nov. 21, paring their investment in the shares this year to 13.9 billion rupees, according to data from the market regulator. Foreign funds have cut holdings of local shares by $2 billion from a record $104.4 billion in July, as investors sold emerging market assets on concern the U.S. and Europe will struggle to curb deficits.
“All macroeconomic indicators are looking very bad, be it inflation, economic growth or the fiscal deficit situation,” K.R. Bharat, managing director of Mumbai-based Advent Advisory Services Pvt., told Bloomberg UTV today. “There seems to be no silver lining on the horizon when it comes to Europe or India.”
The S&P CNX Nifty Index on the National Stock Exchange of India Ltd. dropped 2.2 percent to 4,706.45. The BSE 200 Index slid 2.2 percent.
Metals Soften
Reliance Industries plunged 2.7 percent to 773.4 rupees. Infosys tumbled 2.6 percent to 2,652.65 rupees. The two stocks have the biggest weighting on the Sensex.
Hindalco fell 2.1 percent to 119.45 rupees, extending this year’s loss to 52 percent, the most among Sensex companies. The London Metal Exchange Index of prices for six base metals lost 2.5 percent yesterday.
Tata Steel Ltd. (TATA), the nation’s biggest producer, shed 2.3 percent to 382.65 rupees. Lender HDFC Bank Ltd. (HDFCB) plunged 4 percent to 426.1 rupees. State Bank of India (SBIN), the biggest, slipped 2 percent to 1,655.2 rupees.
Mumbai-based developer DB Realty Ltd. (DBRL) surged 20 percent to 64.5 rupees, the most in a month, after its managing director Vinod Goenka was among five Indian companies’ executives to be freed from jail. The Supreme Court granted them bail following a seven-month incarceration on charges linked to a 2008 sale of licenses to run mobile-phone services. Unitech Ltd. (UT) rallied 4.7 percent to 23.30 rupees, the most since Sept. 15, as managing director Sanjay Chandra was also among the officials freed.
To contact the reporter on this story: Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net
To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net
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