India’s Stocks Drop Most in Three Months as Investors Flee Risk

India’s benchmark stock index fell the most in almost three months as European credit-rating cuts prompted investors to sell riskier assets.

Infosys Technologies Ltd. led software exporters lower as downgrades of Greece and Portugal spurred concern the global economic recovery may be derailed. Tata Steel Ltd., which bought Europe’s Corus Group Ltd. in 2007, slid to a five-week low.

“There is a knee-jerk reaction,” said Deven Choksey, chief executive officer at K.R. Choksey Shares & Securities in Mumbai, who manages about $123 million for wealthy individuals. “We are seeing a global withdrawal of funds.”

The Bombay Stock Exchange’s Sensitive Index, or Sensex, fell 310.54, or 1.8 percent, to 17,380.08, completing its steepest one-day decline since February 5. The S&P CNX Nifty Index on the National Stock Exchange lost 1.8 percent to 5,215.45. The BSE 200 Index retreated 1.6 percent to 2,202.65.

Infosys, the nation’s second-biggest software exporter, dropped the most in a month, sliding 1.4 percent to 2,699.5 rupees. Larger rival Tata Consultancy Services Ltd. retreated 2.2 percent to 770.3 rupees. Wipro Ltd., the No. 3, declined 1.1 percent to 690.8 rupees. They derive about a fifth of their sales from Europe.

Avoiding Risk

Tata Steel, India’s biggest producer of the alloy, sank 3.6 percent to 624.35 rupees, its lowest close since March 15. Investors are avoiding risk following the downgrade of debt ratings of some European countries, said Rahul Jain, an analyst who tracks metals at RBS Equities India Ltd. in Mumbai. About 75 percent of the Tata Steel’s revenue comes from its European operation, he said.

Sterlite Industries (India) Ltd., the biggest copper and zinc producer, sank 1.9 percent to 813.15 rupees. Hindalco Industries Ltd., the No. 1 aluminum producer, lost 2.4 percent to 179.3 rupees.

The London Metal Exchange Index of six industrial metals, including copper and zinc, yesterday tumbled 4.6 percent, its biggest decline since June 22. Crude oil for June delivery dropped in New York to $81.30 a barrel, the lowest since April 19.

“There is nothing safe in global markets now,” said Choksey. “Fortunately, India’s internal growth remains strong. The bounce back in our markets may be equally strong.” He advised investors to buy shares of Indian banks and makers of equipment used in production and construction.

Budget Challenge

State Bank of India rose 0.7 percent to 2,232.2 rupees. The nation’s biggest lender was among the five stocks that gained today on the 30-member Sensex.

Jaiprakash Associates Ltd., a road and dam builder that gets most of its business from India’s government, plunged 4.6 percent to 145.9 rupees, extending yesterday’s 3.9 percent drop. India’s government yesterday needed a regional powerbroker’s backing to win a vote to impose fuel duties.

Hours before a parliamentary vote, the Congress party-led government got the backing of Mayawati, leader of a party with 21 seats in the lower house, to defeat opposition motions seeking to roll back measures imposed in February’s budget. An administration defeated on a budget-related issue is considered to have lost its majority in Parliament.

Opposition parties have been demanding changes to import duties and excise taxes imposed on crude oil and refined products in the Feb. 26 budget, saying the levies are fueling inflation. India’s consumer prices are rising among the fastest in the Asia-Pacific, contributing to two interest-rate increases in a month by the Reserve Bank of India.

Markets Tumble

Stocks worldwide tumbled and the cost to insure against losses in corporate debt increased after Greece’s credit rating was cut to junk and Portugal’s lowered two steps by Standard & Poor’s. The downgrades worsened a debt crisis in Europe and drove up borrowing costs from Italy to Portugal to Ireland. The MSCI Asia Pacific Index dropped 2 percent.

Tata Motors Ltd., owner of Jaguar Land Rover Ltd., plunged 3 percent to 821.55 rupees.

Overseas investors bought a net 5.66 billion rupees ($127 million) of Indian stocks on April 26, taking their total purchases of the equities this year to 290.9 billion rupees, according to the nation’s market regulator.

Inflows from overseas reached a record 834.2 billion rupees in 2009, exceeding the high set two years earlier in domestic currency terms, as the biggest rally in 18 years lured foreign funds. They sold a record 529.9 billion rupees of shares in 2008, triggering a record annual decline.

The following were among the most active on the exchange:

JSW Energy Ltd. (JSW IN) gained 1.2 percent to 119 rupees. The power producer’s profit rose to 2.73 billion rupees in the quarter ended March 31 from 238 million in the same quarter last year, according to the company’s statement yesterday. It also announced a dividend of 0.75 rupee per share.

Motilal Oswal Financial Services Ltd. (MOFS IN) rose 9.8 percent to 181.45 rupees. The brokerage backed by New Vernon Private Equity Ltd. said profit in its fourth quarter surged to 518.9 million rupees from 158.2 million rupees a year earlier, and it will pay a dividend of 1.2 rupees a share.

Reliance Natural Resources Ltd. (RNR IN), owned by billionaire Anil Ambani, climbed 6.2 percent to 66.25 rupees, its highest in almost three months. Investors are speculating India’s Supreme Court may soon rule in the company’s favor in a gas supply dispute, said V.S.R. Sastry, vice president of equity research at Firstcall India Equity Advisors Pvt. in Mumbai.

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