Indian stocks fell the most in two weeks on speculation faster inflation will limit the extent to which the central bank may ease monetary policy next week.
The S&P BSE Sensex index dropped 1 percent to 19,373.54 at 3:10 p.m. in Mumbai, bound for the steepest slide since Feb. 28. Volumes on the gauge were 13 percent less than the 30-day average for this time of day. Tata Motors Ltd. (TTMT) lost 1.5 percent after Jaguar Land Rover sales in China dropped 22 percent last month. Infosys Ltd. (INFO), India’s second-largest software exporter, and ICICI Bank Ltd. (ICICIBC) lost at least 1.5 percent each.
Consumer-price inflation climbed 10.9 percent in February from a year earlier, compared with 10.79 percent in January, data showed yesterday. Another report tomorrow may show that wholesale prices rose 6.6 percent last month, compared with 6.62 percent in January, according to a Bloomberg survey. The Reserve Bank of India Governor Duvvuri Subbarao said last month inflation risks will affect how much he can cut borrowing costs.
“The inflation rate is not coming down and that will deter the RBI from easing monetary policy,” Arun Kejriwal, director at Mumbai-based Kejriwal Research & Investment Services, said by phone. “We don’t expect a cut next week.”
The central bank, which reduced the repurchase rate by 25 basis points in January, will review its policy on March 19.
Tata Motors retreated 1.5 percent to 300.1 rupees. Sales of Jaguar Land Rover dropped 22 percent last month in China, its biggest market. Maruti Suzuki India Ltd. (MSIL), the biggest carmaker, dropped 2.2 percent to 1,385.25 rupees, its fourth day of decline.
Local carmakers are bracing for the first industrywide annual sales decline, with local deliveries having fallen 4.6 percent to 1.71 million units in the 11 months ended in February, data from the producers’ group show.
“Things are slowing down and auto sales have started to reflect the mood of the population,” Prateek Agrawal, chief investment officer at ASK Investment Managers Pvt., which has 16 billion rupees ($299 million) under management, said in an interview to Bloomberg TV India today. “After a long period of time we’re looking at negative numbers from the two-wheeler and automobiles space.”
ICICI Bank retreated 1.7 percent to 1,104.4 rupees. All 14 stocks on the S&P BSE Bankex retreated. The gauge plunged 1.9 percent, heading for its steepest fall since Feb. 28.
Infosys slid 1.9 percent to 2,859.5 rupees. Aluminum maker Hindalco Industries Ltd. (HNDL) fell 3.2 percent to 96.3 rupees.
The S&P CNX Nifty Index of the National Stock Exchange of India slid 1 percent to 5,854.15. India VIX, which measures the cost of protection against losses in the Nifty, surged 6.4 percent to 16.10.
The Sensex slumped 5.2 percent in February, its biggest monthly fall since May, as earnings at 43 percent of the index companies missed estimates in the three months through Dec. 31, compared with 40 percent in the previous two quarters, data compiled by Bloomberg show. India’s economy grew 4.5 percent from a year ago in the final three months of 2012, the weakest pace in almost four years, government data showed on Feb. 28.
The Sensex is valued at 13.7 times projected 12-month profits, compared with 14.3 times on Jan. 25, when the gauge climbed to a two-year high, data compiled by Bloomberg show. That compares with the MSCI Emerging Markets Index’s 10.7 times.
Foreigners bought a net $186 million worth of shares on March 11, taking their net investment in Indian (SENSEX) equities this year to $9.2 billion, a record for the period, data compiled by Bloomberg show. They bought a net $24.5 billion worth of shares last year, the most among 10 Asian markets tracked by Bloomberg.
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