India’s (SENSEX) benchmark index declined to an 11-month low as the rupee weakened to a record. Technology companies and drugmakers led the losses.
State Bank of India dropped 0.4 percent, erasing an early rally of 6.2 percent. Infosys Ltd. (INFO), the nation’s second-largest software maker, slid 1.6 percent. The S&P BSE Infotech Index has surged 28 percent this year, compared with the 7.8 percent fall in the S&P BSE Sensex. Ranbaxy Laboratories Ltd. (RBXY), India’s biggest drugmaker, slumped 13 percent, the most since February 2009. The stock soared 33 percent this month through yesterday. Eight of the 30 Sensex stocks retreated more than 4 percent.
The Sensex slumped 1.9 percent to 17,905.91, the lowest close since Sept. 11. The gauge climbed as much as 1.8 percent earlier after the central bank said it would buy government bonds to stem a surge in long-term borrowing costs. The rupee’s slide to a record 64.55 per dollar sparked concern that policy makers’ scope to revive the economy will be curbed. The Reserve Bank of India in July raised two rates to support the currency.
“There is complete panic in the market as the rupee has gone into a free fall,” Manish Sonthalia, a Mumbai-based money manager at Motilal Oswal Asset Management Co., which oversees about $200 million in stocks, said by phone. “The RBI and the government are running out of options.”
Foreign funds have pulled about $12 billion from domestic stocks and bonds while the rupee has slid 15 percent since May 22, when the Federal Reserve Chairman Ben S. Bernanke signaled the U.S. may taper stimulus policies if the economy improves. They sold a net $214 million of local shares on Aug. 20, the most since July 12, data from the regulator showed. That pared this year’s inflow into stocks to $12.2 billion, still the second-highest among 10 Asian markets tracked by Bloomberg.
“We took some money off the table,” Aadil Ebrahim, a Hong Kong-based portfolio manager at Bowen Asia Ltd., said in an interview on Bloomberg TV India today. “There’s no rush to go back to India for the time being.”
The Federal Open Market Committee publishes minutes of its July meeting today, with 65 percent of economists surveyed by Bloomberg predicting the Fed will taper bond purchases, known as quantitative easing, in September.
State Bank fell 6.1 rupees to 1,548 rupees. Infosys lost 1.6 percent to 2,958.75 rupees. Larger rival Tata Consultancy Services Ltd. (TCS) declined 1.1 percent to 1,717.8 rupees. Wipro Ltd. (WPRO), the third-biggest software services provider, retreated 1.4 percent to 441.95 rupees.
Ranbaxy, which gets 79 percent of its sales from overseas, fell 50 rupees to 331.25 rupees. Sun Pharmaceutical Industries Ltd. (SUNP), India’s largest drugmaker by value, slumped 4.9 percent to 482.45 rupees, paring this year’s advance to 31 percent.
“Selling in export-oriented companies and net foreign exchange earners shows investors are booking profit,” S. Ranganathan, head of research at LKP Shares & Securities Ltd., said in an interview on Bloomberg TV India.
Reliance Industries Ltd. (RIL), owner of the world’s largest refining complex, lost 5.1 percent to 783.6 rupees. Cigarette maker ITC Ltd. (ITC) decreased 4.6 percent to 300.85 rupees. The two stocks have a combined 20 percent weighting on the Sensex.
The RBI last month increased both the marginal standing facility rate, and the bank rate by 200 basis points to 10.25 percent. It tightened banks’ daily reserve requirements and drained money through securities offerings to boost the rupee.
The central bank will buy 80 billion rupees ($1.3 billion) of bonds in the open market on Aug. 23 and reduce weekly sales of cash-management bills to rein in a surge in yields, it said in a statement yesterday.
“They’ve tried in bits and pieces to stabilize the rupee, and it hasn’t worked,” Bowen’s Ebrahim said. “The market has stopped reacting to government announcements. It wants to see action on the ground.”
The CNX Nifty (NIFTY) Index on the National Stock Exchange slid 1.8 percent to 5,302.55, its lowest level since Sept. 6. India VIX climbed 3.2 percent, extending its four-day advance to 50 percent, the data show.
Volume on the Sensex was 55 percent higher than the 30-day average at the close.
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