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India’s Sensex Index Drops, Led by Sterlite, State-Run Refiners

India’s benchmark stock index fell for a second day as investors withdrew funds from riskier assets amid concern that Europe’s sovereign-debt crisis will harm the global recovery.

Sterlite Industries (India) Ltd., the nation’s largest copper producer, dropped to the lowest level in more than two weeks as the price of the metal retreated. Fitch Rating said Britain’s deficit challenge is “formidable,” adding to concerns Europe’s fiscal crisis is spreading. Indian Oil Corp. led state-run refiners lower after the government delayed a decision on raising fuel prices, citing concern about inflation.

“The problems in Europe means demand in the region will drop, and that’s a concern for us,” said Alex Mathews, head of research at Geojit BNP Paribas Financial Services Ltd. in Kochi, southern India. “Global markets are highly correlated and they are weak at the moment.”

The Bombay Stock Exchange’s Sensitive Index, or Sensex, lost 163.97, or 1 percent, to 16,617.10. The measure reversed an earlier advance of as much as 0.7 percent after Fitch’s comments. The S&P CNX Nifty Index on the National Stock Exchange dropped 0.9 percent to 4,987.10. The BSE 200 Index fell 0.9 percent to 2,115.38.

Sterlite fell 1.9 percent to 609.25 rupees. The price of copper dropped in London for a seventh day, erasing an earlier gain. Jindal Steel Ltd., India’s third-biggest producer, lost 2 percent to 1,012.05 rupees. The company is in talks to buy coking coal from suppliers that are asking about 13 percent more for the raw material.

Budget Deficits

Fitch said the U.K. needs to accelerate plans to reduce its budget deficit. The warning came as the European Union pledged tougher sanctions on governments that break deficit rules.

Indian Oil Corp., the largest state-owned refiner, dropped 1.3 percent to 338.25 rupees. The government deferred a decision on increasing fuel prices, citing concern about the effect on inflation. Bharat Petroleum Corp., the No. 2, lost 3.5 percent to 543.75 rupees. Hindustan Petroleum Corp. retreated 2.2 percent to 348.75 rupees.

Ministers may reconvene in 10 days to review a recommendation to raise fuel prices, Oil Secretary Sthanunathan Sundareshan said. The inflation rate for industrial workers was more than 13 percent in April, while prices paid by farm workers rose about 15 percent. That compares with a 2.8 percent increase in China’s consumer prices.

Overseas investors bought a net 2.75 billion rupees ($58.9 million) of Indian equities on June 4, increasing total purchases of the stocks this year to 215 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 was among the most active on the exchange:

Choksi Laboratories Ltd. (CAS IN), a research company, advanced 2.5 percent to 18.7 rupees as 1.1 percent of its shares changed hands in three transactions. Buyers and sellers weren’t immediately known.

Rana Sugars Ltd. (RANA IN), a sweetner maker, climbed 2.6 percent to 12 rupees after saying in a stock exchange filing that its board will consider options including separating sugar, power and distillery units.

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