India’s benchmark stock index fell to near its lowest level this year as the rupee’s decline to a record renewed concern the government will find it difficult to control inflation and the fiscal deficit.
Bharti Airtel Ltd. (BHARTI), the nation’s largest mobile-phone operator, slumped to its lowest level in about two years. Tata Power Co. (TPWR), the largest private utility, tumbled to its lowest price since January after unexpectedly reporting a loss, partly due to currency losses. The rupee touched an all-time low of 56.2213 per dollar today.
The BSE India Sensitive Index (SENSEX), or Sensex, retreated 0.5 percent to 15,948.10 at the close, its lowest level since Jan. 9. The 30-stock gauge has lost 13.5 percent from its Feb. 21 high, exceeding the 10 percent slump that signifies a correction to some investors.
“Currency is the biggest issue,” Ambareesh Baliga, chief operating officer at Way2Wealth Brokers Pvt. in Mumbai, told Bloomberg UTV today. “This could lead to inflation which is not demand led, but currency-led. If the fiscal deficit slips further we could possibly see the rupee at 58 to 60 a dollar and calculations will go haywire.”
Concern India’s outlook has worsened because of trade and fiscal deficits, policy gridlock, elevated consumer prices and faltering global growth has made the rupee the worst-performing Asian currency this quarter. Prime Minister Manmohan Singh said yesterday the government needs to take “difficult” steps to curb spending and boost revenue as his Congress party and its allies marked the third anniversary of their government.
Foreign funds have pulled out a net $71 million from local shares this month, after becoming net sellers in April for the first time in 2012, data from the regulator show. Still, their investments of a net $8.7 billion into local equities so far this year is a record for the period, the data show.
The rupee’s slide “should be a wake-up call for Indian authorities,” Geoff Lewis, head of investment services at JPMorgan Asset Management in Hong Kong, said on Bloomberg UTV today. “They really need to be more proactive in regaining or sustaining investor confidence. India has some macro-economic problems and yet very little of the $9 billion of the portfolio flows has left the country. Investors are watching carefully.”
The rupee declined 1.1 percent to 56.0050 per dollar at the 5 p.m. close, extending this quarter’s loss to 9.2 percent, the worst performance among Asian currencies. A weak currency rupee fuels inflation by raising the cost of oil in a nation that buys 80 percent of its crude from overseas.
India VIX, which measures the cost of protection against losses in the S&P CNX Nifty Index, jumped 11 percent to 27.13, the highest level since March 6. The Nifty lost 0.5 percent to 4,835.65. The BSE 200 Index too fell 0.5 percent. A total of 715 million shares traded on the BSE and NSE yesterday, 21 percent less than the 12-month daily average.
Bharti Airtel plunged 4.4 percent to 282.1 rupees, its lowest price since July 8, 2010. Tata Power lost 1.9 percent to 88.65 rupees, its lowest close since Jan. 2, after reporting an unexpected loss due to an impairment provision for its Mundra plant and currency losses. Group loss was 6.29 billion rupees ($114 million) in the March quarter, compared with a profit of 6.25 billion rupees a year earlier.
Housing Development Finance Corp. (HDFC), the biggest mortgage lender, slid 1.1 percent to 635.5 rupees, ending a four-day advance. DLF Ltd. (DLFU), the largest developer, retreated 1.2 percent to 183.9 rupees. Sterlite Industries (India) Ltd. (STLT), the biggest copper and zinc producer, decreased 1.5 percent to 94.35 rupees, extending this week’s fall to 6.5 percent.
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