India Nifty Futures Decline as RBI Signals No Stimulus

Indian (SENSEX) stocks declined the most in about a month after the central bank said concerns about inflation has reduced the scope to ease monetary policy.

The BSE India Sensitive Index, or Sensex, fell 1 percent to 19,795.99, the most since Dec. 21, according to preliminary closing prices. The gauge surpassed the 20,000 level yesterday for the first time in two years. Tata Motors Ltd. (TTMT) decreased 3 percent after sales of its Jaguar and Land Rover units missed estimates. ICICI Bank Ltd. (ICICIBC) led other lenders lower.

The central bank’s limited scope for stimulus “is a big concern,” Reserve Bank of India Governor Duvvuri Subbarao said in a speech in Lucknow late yesterday. Moderation in inflation to 7.18 percent in December, the slowest in three years, was a “decline from a peak, but still quite high,” he said.

The RBI will probably restrict its action at the Jan. 29 review to a 25 basis-point reduction in the repurchase rate to 7.75 percent, 13 of 16 analysts said in a Bloomberg survey. The rest expect a cut to 7.5 percent.

The central bank signaled last month that monetary policy must shift toward aiding economic growth, predicting inflation will moderate. The authority has kept its benchmark borrowing cost unchanged at 8 percent for five straight meetings. The finance ministry predicts the economy will expand as little as 5.7 percent in the year to March 31, the slowest in a decade.

To contact the reporter on this story: Santanu Chakraborty in Mumbai at schakrabor11@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

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