India’s Sensex Slumps to 11-Month Low as Rupee Weakens to Record

Indian stocks tumbled for the third day, with the benchmark index poised for an 11-month low, after the nation’s currency sank to a record low.

State Bank of India plunged to its lowest level in more than four years, putting a gauge of 13 lenders on course to close at 17-month low. ITC Ltd. (ITC), India’s biggest cigarette maker which has the highest weighting on the benchmark stock index, dropped 2.5 percent. The rupee fell to an unprecedented 64.12 per dollar.

The S&P BSE Sensex retreated 1.1 percent to 18,111.65 at 10:09 a.m. in Mumbai. The 30-stock measure has slid 11 percent from this year’s high on July 23 amid concerns policy makers’ efforts to contain a record slump in the currency will hurt economic growth. Citigroup Inc. cut its year-end forecast for the Sensex to 18,900 from 20,800 in a report dated today.

Economic slowdown and a weak currency is hurting company earnings. Combined profits for the 30 companies in the Sensex increased 1.4 percent in the three months ended June compared with an estimate of 5.8 percent before the reporting season began, Bank of America analysts Jyotivardhan Jaipuria and Anand Kumar wrote in a report dated yesterday.

About 47 percent of Sensex companies that posted earnings for the June quarter missed analyst estimates. That compares with 27 percent for the March quarter, and 43 percent in the three months ended December, data compiled by Bloomberg show.

“It appears we’re not going to see any growth in earnings for this fiscal year” ending March 2014, Manish Sonthalia, who manages about $200 million in equities at Motilal Oswal Asset Management Co. in Mumbai, said in an interview to Bloomberg TV India today.

Rupee Outlook

The Reserve Bank of India has since mid-July raised two interest rates, tightened lenders’ access to cash, increased duty on precious metal imports, targeted foreign-currency outflows and boosted efforts to lure investment to steady the weakening currency.

UBS AG says a drop in the currency to 70 per dollar is possible and Credit Suisse Group AG sees a decline to 65 as slow growth and a record current-account deficit leave Asia’s third-biggest economy vulnerable to outflows and as the U.S. prepares to pare monetary stimulus.

“The rupee is at the risk of completely losing its anchor,” Bhanu Baweja, the global head of emerging-market cross-asset strategy at UBS AG, said in an interview with Bloomberg TV India yesterday. “You’re in a situation where no rupee forecast is sacrosanct.”

GDP Growth

The RBI estimates India’s economy may expand 5.5 percent in the year ending March 2014, compared with 5 percent in the previous 12-month period, the slowest in a decade. That trails the 10-year average of about 8 percent, as well as the performance of regional nations from Indonesia to the Philippines.

The Sensex has lost 7 percent this year and trades at 12.8 times projected 12-month earnings, compared with the MSCI Emerging Markets Index’s 9.9 times. The index’s 30-day volatility rose to the highest since April 2012 yesterday.

International investors sold a net $81 million of Indian (SENSEX) shares on Aug. 16, data from the regulator show. That pared this year’s inflow to $12.5 billion, the data show. Foreigners pulled $3 billion from stocks and bonds last month.

To contact the reporter on this story: Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net

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

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