Indian Stocks Drop to One-Month Low on Reform, Greece
Indian stocks fell to the lowest in more than a month on concerns the government may face further roadblocks to its economic reform agenda and amid fresh signs Greece may exit the euro.
Maruti Suzuki India Ltd. (MSIL), India’s biggest carmaker, slumped after it stopped work at its Manesar factory and said production wouldn’t restart until a probe is completed into last week’s rioting. Jindal Steel & Power Ltd. (JSP), the country’s second-biggest steelmaker by value, dropped 2.7 percent.
The BSE India Sensitive Index, or Sensex, fell 1.6 percent to 16,877.35 at close in Mumbai, the lowest since June 19.
Six Indian political parties wrote a joint letter to Prime Minister Manmohan Singh on July 21 asking the government not to revive a plan to allow overseas retailers including Wal-Mart Stores Inc. (WMT) to open supermarkets. The MSCI Asia Pacific Index dropped on concern China’s economic growth will slow and after German Vice Chancellor Philipp Roesler said he’s “very skeptical” that leaders in the European Union, India’s largest trading partner, will be able to rescue Greece.
“Political resistance to economic reforms is going to hurt market sentiment,” Sadanand Shetty, a senior fund manager at Taurus Asset Management Co., which has about $671 million in assets, said by phone. “There is expectation that the government will break free from its policy paralysis. If they don’t deliver now, we will be in for some trouble.”
The Indian government is trying to revive its plan to overhaul the retail sector, which has been halted since December amid protests from opposition parties and the Trinamool Congress, Singh’s biggest ally in the governing alliance.
Singh, who took control of the finance ministry in June, has pledged to boost growth after expansion slowed to the lowest in almost a decade. Apart from the plan to open the country’s retail sector, an anti-corruption bill and proposals to allow foreign direct investment in aviation and pensions are also stalled.
The Reserve Bank of India’s technical advisory committee will meet on July 25 in Mumbai to help formulate a policy response to decelerating growth and rising inflation, the Press Trust of India reported yesterday, without saying where it got the information. The authority meets for its next policy review on July 31.
Death at Maruti
Maruti lost 5.9 percent to 1,079.95 rupees. Chairman R.C. Bhargava on July 21 ruled out an early resumption of work at the Manesar factory, which accounts for about 40 percent of the company’s manufacturing capacity. Last week’s violence resulted in the death of a general manager and left at least 70 injured, prompting the Federation of Indian Chambers of Commerce & Industry to say the incident has undermined India’s reputation as an investment destination.
Jindal Steel & Power slumped 2.7 percent to 415.05 rupees after Bolivian authorities arrested two employees and confiscated company equipment and property after it canceled a contract to develop an iron-ore mine, the company said in an e- mailed statement.
Larsen & Toubro Ltd. (LT) fell 0.9 percent to 1,378.1 rupees. India’s biggest builder of power networks and airports posted a 16 percent increase in first-quarter profit after it boosted sales. Net income rose to 8.64 billion rupees ($155 million) in the three months ended June 30, from 7.46 billion rupees a year earlier. That beat the 8.13 billion-rupee median of 19 analysts’ estimates compiled by Bloomberg.
Hindustan Unilever Ltd. (HUVR), the Indian unit of the world’s second-largest consumer goods company, may post a profit of 6.96 billion rupees, compared with 6.27 billion last year, according to 23 analysts in a Bloomberg survey.
India VIX, which measures the cost of protection against losses in the S&P CNX Nifty Index (NIFTY), rose 10.5 percent to 18.66, the steepest gain since May 23. The S&P CNX Nifty Index fell 1.7 percent to 5,117.95 and its July futures settled at 5,122.10. The BSE-200 Index declined 1.7 percent. Combined volume on the nation’s top two bourses was 635 million shares on July 20, 30 percent less than the 12-month daily average of 901 million shares.
The Sensex has gained 9 percent this year. The gauge trades at 13.2 times estimated earnings, compared with 10 times for the MSCI Emerging Markets Index.
Four out of nine companies on the Sensex that have reported June-quarter results have missed analyst estimates, according to data compiled by Bloomberg. Profit for 30 percent of index companies missed estimates in the March quarter, compared with 47 percent in the period ended December, the data show.
Overseas investors bought domestic shares for a 14th day on July 19, the longest run of net purchases since February, data from the Securities & Exchange Board of India show. Foreign funds have invested a net $10.2 billion in local equities since Jan. 1, the highest in Asia and a record for the period, according to data compiled by Bloomberg.
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