Most Indian stocks declined as heightened concern that Europe, the nation’s largest trading partner, will struggle to contain its debt crisis outweighed speculation the central bank will lower rates.
Maruti Suzuki India Ltd., the nation’s biggest carmaker, slumped 3.2 percent, pacing losses among its peers after a local newspaper reported that the government may impose an additional tax on diesel vehicles. Tata Motors Ltd., the owner of Jaguar Land Rover luxury brands, lost 2.3 percent. Hindustan Unilever Ltd., the local unit of the world’s second-largest consumer goods company, jumped 3.5 percent.
The BSE India Sensitive Index, or Sensex, rose 0.1 percent to 16,880.51, with 18 of its 30 stocks closing lower. European stocks fell as borrowing costs rose at debt auctions by Germany and Italy. Greece holds polls on June 17, which may determine the country’s future in the euro.
“Greece remains a matter of concern and investors need to be cautious,” Raamdeo Agrawal, joint managing director at Motilal Oswal Financial Services Ltd. in Mumbai, told Bloomberg UTV in an interview. In India, “a rate cut must happen” when the central bank reviews policy next week, he said.
Official data yesterday showed India’s factory output grew less than analysts estimated in April, adding to the case for a reduction in rates, before a government report tomorrow that may show inflation accelerated for a second month. The Sensex had its best weekly gain of 2012 last week on speculation the Reserve Bank of India will join regional policy makers in cutting borrowing costs to revive growth.
The RBI may cut its benchmark rate to 7.75 percent from 8 percent on June 18, according to the median estimate of 18 analysts in a Bloomberg survey.
India’s gross domestic product expanded 5.3 percent from a year ago in the March quarter, the weakest pace in nine years, stoking concern the nation’s economic outlook has deteriorated as policy paralysis deters investment and Europe’s debt crisis crimps exports. The slowdown prompted Prime Minister Manmohan Singh to pledge last week investments into infrastructure.
Standard & Poor’s, which cut the nation’s credit outlook to negative from stable in April, said June 11 that India may lose its investment-grade rating due political roadblocks to economic policy-making.
Wholesale price growth may have accelerated for a second month to 7.5 percent in May, from 7.23 percent in April, according to the median estimate of 31 analysts in a Bloomberg survey. The data will be published tomorrow.
The 30-stock Sensex has advanced 9.2 percent this year and trades at 13.2 times estimated earnings, near the lowest level in more than three years, data compiled by Bloomberg show. That compares with the MSCI Emerging Markets Index’s 10 times.
India VIX, which measures the cost of protection against losses in the S&P CNX Nifty Index, rose 0.7 percent to 24.36. The Nifty added 0.1 percent to 5,121.45 while its June futures traded at 5,127.25. The BSE-200 Index gained 0.1 percent to 2,071.73. Combined trading volume on India’s top two exchanges was 814.5 million shares yesterday, compared with a 12-month daily average of 906.5 million.
Sterlite Industries (India) Ltd., the nation’s top copper producer, retreated 2.5 percent to 101.75 rupees, ending six days of gains. The company, owned by billionaire Anil Agarwal, scrapped a plan to raise at least 15 billion rupees selling bonds, according to a person familiar with the matter. Senjam Raj Sekhar, a spokesman at Sterlite’s parent Vedanta Resources Plc, declined to comment.
Maruti fell the most on the Sensex. The stock slumped 3.2 percent to 1,107.75 rupees, the most since May 31. Tata Motors dropped 2.3 percent to 237.40 rupees. Mahindra & Mahindra Ltd., the biggest SUV maker, slid 1.8 percent to 683.4 rupees.
India may impose the tax to check the shift towards diesel cars after gasoline prices rose, the Economic Times reported, citing government officials it didn’t identify.
Hindustan Unilever rallied 3.5 percent to 447.55 rupees, a record close. The stock was the biggest gainer on the Sensex. Larsen & Toubro Ltd., the largest engineering company, jumped 2.6 percent to 1,349.9 rupees, the highest close since April 3.
Overseas investors were net buyers of local shares for a fifth day on June 12, purchasing a net $4.25 million of stocks, data from the regulator show. Foreigners cut holdings by $273 million in May, a second month of net sales. Still, funds have placed a net $8.5 billion in local equities this year, a record for the period, data compiled by Bloomberg show.