Indian Stocks Drop Most in Two Months; SBI, Sterlite Lead Fall

Indian (SENSEX) stocks declined the most in two months, erasing a weekly advance, as some investors judged recent gains excessive. Banks and industrials led the retreat.

The BSE India Sensitive Index, or Sensex, fell 1.1 percent to 19,237.33, according to preliminary closing prices in Mumbai. The gauge climbed to its highest level since April 2011 on Dec. 19. State Bank of India Ltd., the nation’s biggest lender, lost 2 percent. Sterlite Industries (India) Ltd. (STLT), the largest copper producer, plunged 3.5 percent.

The Sensex has risen 25 percent this year, headed for its biggest annual jump since 2009, as government steps to open the economy to offshore investment lured foreigners. The measure trades at 15.4 times estimated earnings, near the highest level since April, data compiled by Bloomberg show. Emerging-market stocks fell the most in six week amid weakening optimism U.S. budget talks on how to avoid more than $600 billion in spending cuts and tax increases, known as the fiscal cliff, will succeed after House Republican leaders canceled a planned vote.

“In the absence of a domestic trigger for the market all eyes are on the global news flow, especially the fiscal cliff issue in the U.S.,” said Arun Kejriwal, director at Kejriwal Research & Investment Services Pvt. in Mumbai. “Foreign funds are sitting on good profits on their Indian investments, and it won’t be surprising if they take a little money off the table before the holiday week.”

U.S. Republicans are demanding to cut the nation’s deficit with spending cuts, while President Barack Obama wants to raise taxes for top earners. The 21 nations in MSCI’s developing- nations gauge send about 17 percent of their exports to the U.S. on average, data compiled by the World Trade Organization show.

Overseas funds were net buyers of Indian stocks for a 25th straight day on Dec. 19. Foreign funds have bought a net $23.1 billion of local shares this year, the highest among 10 Asian markets tracked by Bloomberg, excluding China, data compiled by Bloomberg show.

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

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.