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Nifty-Index Futures Swing Between Gain, Loss on ECB

Indian stocks declined for the first time in five days as investors await a policy announcement by the European Central Bank after the Federal Reserve refrained from adding stimulus to the U.S. economy.

Tata Motors Ltd., the owner of Jaguar Land Rover, dropped, ending a four-day rally. Sterlite Industries (India) Ltd., the biggest copper and zinc maker, retreated 1.3 percent. The BSE India Sensitive Index, or Sensex, lost 0.2 percent to 17,224.36 at the close, ending a four-day, 3.7 percent rally.

Fed Chairman Ben S. Bernanke held off on increasing record stimulus even as economic growth slowed. The ECB is due to make a policy announcement today, with President Mario Draghi vowing policy makers will do whatever is needed to preserve the euro. Most investors in Asia, the Americas and Europe expect the ECB will engage in sovereign-bond purchases in support of Spain and Italy, Goldman Sachs Group said in a note yesterday, citing a survey of 410 people.

“All eyes are on the ECB now,” said U.R. Bhat, managing director of Dalton Capital Advisors India Pvt. in Mumbai. “The market has been holding forth in expectation of policy action, both from global central banks and the Indian government.”

Investors and politicians are clamoring for ECB action to quell Europe’s crisis, which is threatening to cripple Spain and Italy and splinter the 17-nation monetary union. ECB policy makers meeting in Frankfurt today left the key interest rate unchanged as President Mario faces pressure to cut bond yields to protect the euro. The decision came after trading ended in Mumbai. Draghi will brief reporters at 2:30 p.m. in Frankfurt.

Europe is India’s largest trading parter and took in 17.2 percent of the Asian nation’s exports in the six months ended September 2011, data from the trade ministry show.

Food Costs

Reserve Bank of India Governor Duvvuri Subbarao left the benchmark repurchase rate unchanged at 8 percent for a second meeting on July 31. The RBI raised its inflation forecast to 7 percent as a drop in the rupee, infrastructure bottlenecks and higher food costs stoke price pressures, a trend that may be worsened by the impact of the monsoon.

Singh is grappling with a budget deficit and discord in the ruling coalition that has set back efforts to turn around a slowdown in investment. Still, the Sensex has risen 11 percent since this year as foreign funds bought a net $10.5 billion of stocks on optimism Singh will hasten economic reforms to revive an economy growing at the weakest pace in almost a decade. The flows into Indian equities are the highest in Asia in 2012 and a record for the period.

“We are a turning point and foreign investors are betting we will negotiate it well,” Dalton’s Bhat said.

Palaniappan Chidambaram was named finance minister for the third time on July 31, taking over from Singh, who assumed the post temporarily after Pranab Mukherjee resigned to run for the country’s presidency.

Earnings Scorecard

India VIX, which measures the cost of protection against losses in the S&P CNX Nifty Index, surged 2 percent to 16.77. The Nifty lost 0.2 percent to 5,227.75. The BSE-200 Index lost 0.1 percent.

Seven out of 20, or 35 percent, of companies on the Sensex that have reported June-quarter earnings have trailed analyst estimates, according to data compiled by Bloomberg. Profit for 30 percent of index companies missed forecasts in the March quarter, compared with 47 percent three months earlier.

Tata Motors slid 2.1 percent to 222.7 rupees, ending a four-day, 11 percent rally. Oil & Natural Gas Corp., the top state-owned oil explorer, lost 1.2 percent to 276.85 rupees.

Sterlite lost 1.3 percent to 104.75 rupees. Tata Power Co., the biggest electricity generator outside state control, retreated 1.9 percent to 988 rupees.

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