Indian equities retreated for the first time in four days as the rupee fell to a record, and after reports showed the U.S. economic recovery is slowing.
Reliance Industries Ltd., operator of the world’s largest refining complex, fell to a two-week low. Hindalco Industries Ltd., the aluminum maker that controls U.S.-based Novelis Inc., dropped the most in five weeks. The BSE India Sensitive Index lost 0.4 percent to 16,972.51 at close, paring the weekly gain to 0.1 percent.
India’s rupee touched an all-time low and is headed for its worst week since September, fanning concern the government will fail to curb the fastest inflation and pare the widest fiscal deficit among the largest emerging economies. Offshore funds sold $78.4 million more domestic shares than they bought this week through June 21, data from the regulator show. The Sensex has dropped 8 percent from its Feb. 21 high.
“The economy is going to struggle over the next six to nine months because growth and the deficits are a concern as the rupee continues to weaken,” Jyotivardhan Jaipuria, head of India research at Bank of America Corp., said in an interview to Bloomberg UTV today. “Rupee depreciation is not something you want if you are a foreign investor because it reduces your return in a market where returns are difficult to come by.”
The currency fell 1.5 percent and touched an unprecedented 57.3275 per dollar, extending this week’s loss to 3 percent, the most since the five days ended Sept. 23. India’s rupee and Thailand’s baht led other Asian currencies lower as signs the world economy is slowing dented outlook for regional exports.
A Fed Bank of Philadelphia index signaled yesterday the worst contraction in manufacturing in almost a year, while existing U.S. home sales fell more than forecast and jobless claims beat estimates. The Federal Reserve lowered its 2012 U.S. growth forecast this week to a range of 1.9 percent to 2.4 percent, and extended stimulus known as Operation Twist.
Standard & Poor’s and Fitch Ratings said this month India is at risk of losing its investment-grade rating if the government fails to mend its finances.
India may have to sacrifice growth to rein in inflation, Reserve Bank of India Duvvuri Subbarao said on June 19, a day after unexpectedly leaving rates unchanged. Inflation of 7.5 percent is “above our tolerance level” and consumer-price inflation is “disturbing” at more than 10 percent, he said.
Curbing the fiscal deficit and the success of the monsoon are key to cooling prices, Subbarao said. India’s monsoon rain, which accounts for more than 70 percent of annual showers, was 24 percent below a 50-year average since June 1, the state-run weather office said yesterday.
The S&P CNX Nifty Index on the National Stock Exchange decreased 0.4 percent to 5,146.05 and its June futures settled at 5,151.15. India VIX, a gauge of options prices in the Nifty, jumped 3.2 percent to 20.58, its first advance in six days. The BSE-200 Index retreated 0.3 percent to 2,082.68. Combined trading volume on India’s top two exchanges was 749 million shares yesterday, 17 percent less than the 12-month daily average of 904 million.
Reliance fell 1.1 percent to 711 rupees, its lowest close since June 5. Hindalco dropped 3.3 percent to 117.3 rupees. The stock was the worst performer on the 30-member Sensex this week with a 5 percent drop.
Tata Steel Ltd., the biggest producer, slid 2.7 percent to 418.6 rupees, snapping a five-day 5.7 percent rally. Coal India Ltd., the world’s largest producer, lost 1.2 percent to 337.7.
ACC Ltd., the nation’s biggest cement maker and a unit of Holcim Ltd., paced losses among its peers after the Competition Commission of India imposed a penalty of 0.5 times profit for the year 2009-10 and 2010-11. The share tumbled 3.1 percent to 1,215.05 rupees. Ambuja Cements Ltd., another unit of Holcim, fell 2.9 percent to 167.05 rupees.
Earnings at the two companies will probably be the worst hit in 2013, Nomura Holdings Inc. analyst Aatash Shah said in a note today. The companies will pursue “all available legal steps to defend their respective position,” Holcim said by e-mail yesterday.
Jaiprakash Associates Ltd. plunged 4.4 percent to 71.3 rupees. Madras Cements Ltd. lost 4 percent to 150 rupees, ending an eight-day, 11 percent rally.