Indian Nifty Futures Drop, Signaling Stocks to Extend 5-Day Loss

Indian (SENSEX) stock-index futures dropped, signaling the benchmark S&P BSE Sensex index may extend the longest losing streak in almost four months.

SGX CNX Nifty Index futures for August delivery fell 0.3 percent to 5,787 at 9:49 a.m. in Singapore. The underlying CNX Nifty (NIFTY) Index slumped 1.3 percent to 5,755.05 yesterday, the lowest close since June 27. The Sensex dropped for a fifth day, also declining 1.3 percent. The gauge has lost 0.2 percent in July, heading for a second monthly slide. The Bank of New York Mellon India ADR Index of U.S.-traded shares tumbled 2.2 percent, the biggest loss since June 24.

India’s central bank left interest rates unchanged at its policy meeting yesterday, saying increases in borrowing costs earlier this month to stem a slide in the rupee will be reversed in a measured way as the currency stabilizes. The rupee, down 12 percent in the past six months, has been hurt by a record current-account deficit and the prospect of reduced U.S. monetary stimulus, which has spurred capital outflows from emerging markets.

“There was expectation that there will be a partial rollback of the liquidity tightening measures,” Alex Mathews, head of research at Geojit BNP Paribas Financial Services Ltd. (GBNP), said by phone from the southern Indian city of Kochi. “That didn’t come through, plus any rate cut for the next three months at least is ruled out. That’s spooking investors. A forecast for slower growth is weakening the rupee. A weak rupee increases a sell-off by foreign investors and inflation risks.”

Growth Forecast

The Reserve Bank of India cut its economic growth forecast for the year ending March 2014 to 5.5 percent from 5.7 percent and maintained the benchmark rate at 7.25 percent. The Indian economy’s resilience to shocks has eroded and the rapid weakening of the rupee has put the country into a vicious spiral, RBI Governor Duvvuri Subbarao said yesterday.

The rupee fell 1.8 percent to 60.485 per dollar in Mumbai yesterday, the biggest drop since June 10, according to prices from local banks compiled by Bloomberg. It touched 60.575 intraday, the weakest level since July 8, when it plunged to an unprecedented 61.2125.

“It seems slightly strange for the RBI to tell the market it will unwind liquidity tightening measures as and when the currency has stabilized,” Robert Prior-Wandesforde, an analyst at Credit Suisse Group AG, wrote in a note e-mailed today. “By indicating such an approach, it presumably makes it less likely that stability will actually be achieved.”

Foreign Flows

Global funds sold a net $35.3 million of local shares on July 29, paring this year’s net purchases to $12.3 billion, data compiled by Bloomberg show. They have sold $1.05 billion of Indian stocks this month, the most among 10 Asian markets tracked by Bloomberg, extending June’s $1.8 billion sell-off.

ICICI Bank Ltd. (ICICIBC) may announce today profit of 22.2 billion rupees ($367 million) for the three months ended June 30, according to 40 analysts in a Bloomberg survey.

Bharti Airtel Ltd. (BHARTI) may report quarterly net income of 7.5 billion rupees, according to the median estimate of 33 analysts in a Bloomberg survey.

Four of the 13 Sensex members that have posted earnings so far for the June quarter missed analyst estimates. About 27 percent of companies in the measure missed forecasts for the three months ended March, and 43 percent in the quarter through December, data compiled by Bloomberg show.

The Sensex has lost 0.4 percent this year and trades at 13.7 times projected 12-month earnings, down from a 17-month peak of 14.2 times on July 23. The MSCI Emerging Markets Index trades at 10 times.

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

To contact the editor responsible for this story: Michael Patterson at mpatterson10@bloomberg.net

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