Indian Stocks Retreat for Fifth Day on Rate Increase Concern

India’s (SENSEX) benchmark stock index fell for a fifth day after the wholesale inflation rate was faster than economists estimated, spurring concern the central bank may increase borrowing costs.

Mahindra & Mahindra Ltd. (MM), the nation’s largest maker of sport-utility vehicles and tractors, tumbled the most in four months. Jindal Steel & Power Ltd. declined to a three-week low. GlaxoSmithKline Pharmaceuticals Ltd. (GLXO) jumped the most in two decades to a record after its parent offered to increase its stake. Software exporter Infosys Ltd. (INFO) advanced 2.3 percent.

The S&P BSE Sensex lost 0.3 percent to 20,659.52 at the close. Wholesale prices rose 7.52 percent in November compared with 7 percent estimated by economists in a Bloomberg survey, data showed. The Reserve Bank of India and the Federal Reserve will announce policy decisions on Dec. 18. Eleven of 19 analysts in a Bloomberg poll forecast the RBI will increase the repurchase rate by 25 basis points to 8 percent.

“A rate increase is a given, the way inflation numbers are,” Prashasta Seth, a senior fund manager at IIFL Wealth Management Ltd., which has about $1.8 billion of shares under management and advisory, told Bloomberg TV India. “Inflation and the Fed tapering are playing on investors’ minds. We are adding shares of software exporters and drugmakers till we get clarity on these two factors.”

The Fed will probably start trimming its $85 billion of monthly bond purchases this week, according to 34 percent of economists surveyed Dec. 6 by Bloomberg, up from 17 percent in a Nov. 8 poll. The asset buying, referred to as quantitative easing, has spurred inflows into emerging markets. Global funds bought a net $38.7 million of local shares on Dec. 12, taking this year’s inflows to $18.7 billion, the most in Asia after Japan, data from the market regulator show.

Glaxo Offer

Mahindra decreased 2.5 percent to 926.60 rupees. Jindal Steel retreated 3.2 percent, extending last week’s 8.4 percent slide. Aluminum producer Hindalco Industries Ltd. (HNDL) decreased 1.7 percent. Reliance Industries Ltd. (RIL), owner of the world’s largest refining complex, fell 2.3 percent, the most since Sept. 25.

GlaxoSmithKline soared 19 percent to 2,925.60 rupees. Parent GlaxoSmithKline Plc offered to spend $1 billion to raise its stake in its Indian unit to tap increasing demand for medicines in the second-most populous country. Glaxo has offered 3,100 rupees a share, a 26 percent premium to the Indian drugmaker’s Dec. 13 closing price of 2,460.15 rupees, to raise its stake to 75 percent from 50.7 percent, the London-based company said in an e-mailed statement today.

Infosys gained 2.3 percent to 3,452.25 rupees, while larger rival Tata Consultancy Services Ltd. (TCS) added 0.9 percent.

‘Very Uncomfortable’

Consumer prices rose 11.24 percent in November from a year earlier, data on Dec. 12 showed, compared with the 10 percent climb analysts had predicted. RBI Governor Raghuram Rajan has raised interest rates twice to fight rising prices since he moved to the central bank in September.

‘We are very uncomfortable with the current level of inflation,’’ he told reporters in Kolkata on Dec. 12. “We are aware of the weak economy, but we also have to take into account inflationary pressures.”

The Sensex has climbed 6.4 percent this year, the best performer among the four largest emerging markets, and trades at 13.4 times projected 12-month earnings, compared with the MSCI Emerging Markets Index’s 10.1 times.

The CNX Nifty Index decreased 0.2 percent to 6,154.70. The India VIX rose 2.9 percent.

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

To contact the editor responsible for this story: Richard Frost at rfrost4@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.