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Indian Stocks Decline on Inflation Data; HDFC, Tata Steel Lead

Dec. 14 (Bloomberg) -- Indian stocks fell for a fourth time in five days after wholesale prices climbed more than estimated in November, likely limiting the central bank’s scope to halt this week its record series of interest-rate increases.

Housing Development Finance Corp., India’s largest home loan provider, slid to near a three-week low. Tata Steel Ltd., the biggest producer, sank 4.3 percent. Shopper’s Stop Ltd., the second-largest retailer by value, rose for the first time in six days after Prime Minister Manmohan Singh told Bloomberg News in an interview that he expects to succeed in his push to open the retail market to overseas companies after regional elections conclude by the end of March 2012.

The BSE India Sensitive Index, or Sensex, slid 0.8 percent to 15,881.14 at the 3:30 p.m. close in Mumbai. Inflation eased to 9.11 percent, the lowest level in a year, data showed today. The figure is still higher than the 9.06 percent median estimate in a Bloomberg News survey. Inflation has exceeded 9 percent for 12 straight months.

“Inflation data will restrict RBI’s chances of reversing its monetary stance anytime soon,” Neelakantan Sethuram Iyer, Mumbai-based chief investment officer at Daiwa Asset Management India, said in an interview. “Rising fiscal deficit, inflation and a weak rupee is severely limiting the government’s ability to stimulate the economy.”

India’s industrial production contracted 5.1 percent from a year ago in October, data showed Dec. 12. That was the first decline since 2009. The economy grew 6.9 percent in the last quarter, the least in more than two years, while the rupee fell to a record low of 53.52 yesterday.

‘Eminently Bankable’

Asia’s third-largest economy will return to a long-term growth pace of 9 percent, Prime Minister Singh said. Gross domestic product will expand 7.5 percent in the year to March, while inflation will cool to between 6 and 7 percent, he said. The slide in the rupee won’t dent investor confidence, he said.

“We will stay the course,” Singh said in an interview in his office in Parliament House in New Delhi. “We will make India an eminently bankable and creditworthy economy.”

The rupee briefly pared losses, before declining to end the day down 0.9 percent at 53.7150 a dollar, according to data compiled by Bloomberg. The currency has tumbled 17 percent this year, Asia’s worst performance.

Shoppers Stop advanced 1 percent to 310.6 rupees after Singh’s pledge on opening the industry to foreign investment. Wal-Mart Stores Inc. and Tesco Plc are among overseas companies that have pushed to enter India’s retail market.

Valuations Contract

The Sensex has slumped 23 percent this year on concern a weak rupee and record interest-rate increases will compound the effects of the European crisis on profits. The gauge trades at 13.9 times estimated earnings, down from 21.5 times in March 2010. The MSCI Emerging Markets Index is valued at 10 times.

Reserve Bank of India Governor Duvvuri Subbarao has raised the central bank’s repurchase rate 13 times since the start of 2010. The next policy review on Dec. 16.

“A rate cut is still not an option,” Nandkumar Surti, managing director and chief executive officer of JPMorgan Asset Management Inc.’s India unit, said in a Bloomberg UTV interview yesterday. “The RBI indicated in the last policy meeting they might take a pause at this meeting.”

The S&P CNX Nifty Index on the National Stock Exchange of India fell 0.8 percent to 4,763.25, while the BSE 200 Index lost 0.9 percent to 1,918.43.

Housing Development fell 2.5 percent to 630.35 rupees. Tata Steel slid 4.3 percent to 375.75 rupees. Coal India Ltd., the world’s largest producer of the fuel, declined to its lowest level in three weeks. Sterlite Industries India Ltd., the largest copper producer, lost 2.1 percent to 97.25 rupees while Coal India lost 2.5 percent to 300.25 rupees.

Power Fund

Power Grid Corp. of India Ltd. lost 2.8 percent to 96.35 rupees, Tata Power Co. dropped 4.3 percent to 86.75 rupees and Reliance Infrastructure Ltd. lost 3.9 percent to 362.7 rupees. The Indian cabinet approved a National Electricity Fund of 84.7 billion rupees ($1.59 billion), less than expected, to provide interest subsidies on loans for power distribution projects.

Sun Pharmaceutical Industries Ltd., the biggest drugmaker by value, reached a two-week high. It gained 1.8 percent to 521.4 rupees. Larsen & Toubro Ltd., the country’s biggest engineering company, fell 0.9 percent to 1,159.8 rupees.

Overseas investors sold a net 3.19 billion rupees of local stocks on Dec. 12, taking their withdrawals this year to 11.8 billion rupees, according to data from the regulator.

Foreign funds have pared holdings of local shares by $2.4 billion from a record $104.4 billion in July as investors sold emerging-market assets on concern the U.S. and Europe will struggle to curb deficits.

To contact the reporter on this story: Santanu Chakraborty in Mumbai at

To contact the editor responsible for this story: Darren Boey at

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