Indian stocks declined for the first time in three days as stronger-than-forecast U.S. jobs data fueled concern the Federal Reserve will reduce its stimulus program and the rupee weakened to a record.
The S&P BSE Sensex tumbled 0.9 percent to 19,324.77 at the close in Mumbai. The measure’s 30-day volatility held near a one-year high. Reliance Industries Ltd. (RIL), owner of the world’s largest refining complex, lost 1.5 percent. Housing Development Finance Corp. (HDFC) sank the most in five weeks. The rupee slid to an unprecedented 61.2125 per dollar.
The Sensex has dropped 3.7 percent since May 22 when Fed Chairman Ben Bernanke said the central bank will slow stimulus if the U.S. economy improves. That spurred investors to sell emerging markets’ assets, including Indian equities. A weaker currency raises India’s cost of imported oil, likely paring the central bank’s scope to pare interest rates at its meeting on July 30. Crude in New York traded near a 14-month high.
“The environment for emerging markets, including India, is difficult at the moment given the rising U.S. yields and strengthening dollar,” Aneesh Srivastava, chief investment officer at IDBI Federal Life Insurance Co. in Mumbai, said in an interview today. “Chances of a rate cut later this month are zero due to the continuous fall in the rupee. Rising oil prices have only added to India’s woes.”
Data on July 5 showed U.S. payrolls rose 195,000 in June, beating the 165,000 median forecast in a Bloomberg News survey. Global equities have lost more than $3.7 trillion in value and U.S. Treasury yields have climbed to an almost two-year high since May 22. Foreign funds withdrew a net $1.76 billion from Indian (SENSEX) stocks in June, the most since August 2011, according to data compiled by Bloomberg. They sold $3 million of shares on July 5, the data show.
Reliance Industries lost 1.5 percent to 866.95 rupees. The stock had increased 11 percent over the past two weeks. Oil & Natural Gas Corp. (ONGC) tumbled 3.9 percent to 303.85 rupees, its lowest close since June 24.
Housing Development plunged 3.1 percent to 824.05 rupees, the most since May 31. ICICI Bank Ltd. (ICICIBC), the second-biggest lender, retreated 2.2 percent to 1,027.95 rupees, while larger rival State Bank of India lost 1.1 percent to 1,873.2 rupees.
Mahindra & Mahindra Ltd. (MM), India’s largest producer of tractors, lost 2.5 percent to 947.7 rupees. Tata Motors Ltd. (TTMT), the nation’s biggest truckmaker and owner of Jaguar Land Rover, tumbled 2.8 percent to 287.8 rupees, the most since June 26.
JLR factories in U.K. may have to stop production within weeks after delivery workers from DHL who work at three of the carmaker’s main plants voted to strike over pay. The company asked the workers to “return to the negotiating table,” Ken McConomy, spokesman for Jaguar Land Rover, said yesterday.
Reliance Communications Ltd. (RCOM), the mobile phone operator controlled by billionaire Anil Ambani, jumped 7 percent to 145.2 rupees, the highest in more than two years, after the company said it plans to spin off its real estate business. The stock, which is not part of the Sensex, has doubled this year.
The Reserve Bank of India left its key rate unchanged on June 17, ending three straight cuts. While official data June 14 showed wholesale-price inflation slowed to a 43-month low in May, a separate gauge of consumer prices rose 9.31 percent, the fastest after Argentina in the Group of 20 nations. India buys about 80 percent of its crude from overseas.
Deutsche Bank AG cut its year-end Sensex target to 21,000 from 22,500, citing prospects for tapering of Fed’s bond-buying program, a slowdown in China and a weak rupee. A reversal in inflation, elevated interest rates and the current-account gap has been delayed by “the generic risk-off sentiment enveloping emerging markets,” analysts Abhay Laijawala and Abhishek Saraf wrote in a report today.
Crude gained, with West Texas Intermediate trading near the highest price in 14 months, as protests in Egypt fanned concern that Middle East oil supply may be disrupted. Brent crude, the benchmark for two-thirds of the world’s oil, rose 0.2 percent to $107.96 a barrel.
The Dollar Index, which tracks the greenback against six major trading partners, rose to the highest level since July 2010. The rupee fell 0.6 percent to 60.6150 at the close.
The Sensex trades at 12.9 times projected 12-month earnings. While that’s down from a 3 1/2-month high of 13.7 reached May 17, it’s still at a 36 percent premium to the MSCI Emerging Markets Index’s multiple of 9.5.
The CNX Nifty Index on the National Stock Exchange of India fell 1 percent to 5,811.55.
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