Indian stocks fell amid concern the government will struggle to implement measures to revive growth.
The BSE India Sensitive Index, or Sensex, lost 0.2 percent to 17,846.86 at the close, its first loss in three days. Bharti Airtel Ltd., the largest mobile-phone operator, slid to near a six-year low. Reliance Industries Ltd., owner of the world’s largest oil-refining complex, declined the most in two weeks. Housing Development Finance Corp., the largest mortgage lender, dropped the most in a week.
India’s main opposition party demanded that Prime Minister Manmohan Singh resign after a report by the chief auditor last week said the government may have lost $33 billion by giving away coal blocks rather than auctioning them. Both houses of parliament were adjourned for a second day after protests by groups led by the Bharatiya Janata Party, threatening to deepen the political impasse that has stalled legislation.
“The auditor report on coal-block allocation will make it difficult for the government to take tough decisions,” Nirakar Pradhan, chief investment officer at Future Generali India Life Insurance Co., which has 18 billion rupees in assets, said by e-mail. “We don’t expect major reforms happening in the near term owing to political compulsions. Liquidity from foreign inflows has provided support to the markets.”
Offshore funds have bought a net $11.5 billion of shares this year, a record for the period, amid optimism Singh will revive reforms stymied by opposition from his allies to boost an economy growing at the slowest pace in almost a decade. India must damp inflation, allow more foreign investment to revive growth and raise diesel prices to curb subsidies that have widened the shortfall in government finances, Singh’s Economic Advisory Council said Aug. 17.
The budget and a current-account deficits in June prompted Standard & Poor’s and Fitch Ratings to say they may strip India of its investment-grade credit rating.
“Interest-rate cuts by the Reserve Bank of India will get delayed as the fiscal situation is not improving,” said Sandip Sabharwal, chief executive officer of portfolio management at Mumbai-based Prabhudas Lilladher Pvt., said by telephone today. “RBI is waiting for moderation of the fiscal deficit, which doesn’t seem to be happening.”
The RBI left rates unchanged at 8 percent last month to tackle inflation risks as the rupee dropped and the impact of deficient monsoon rains on crops threaten to stoke prices. The economy expanded 5.3 percent in the 5.3 percent in the March quarter, the weakest pace in nine years.
Bharti Airtel dropped 3.8 percent to 248.7 rupees, the lowest since October 2006, after Credit Suisse AG downgraded the stock to underperform. Reliance Industries fell 0.8 percent to 807.8 rupees, the steepest drop since Aug. 9. Housing Development Finance declined 0.8 percent to 726.4 rupees, the sharpest fall since Aug. 14. Larsen & Toubro Ltd., India’s biggest engineering company, dropped 0.7 percent to 1,457.3 rupees.
Tata Steel, India’s biggest producer of the alloy, rose 0.1 percent to 392.55 rupees after two people with direct knowledge of the matter said the company plans to raise about 260 billion rupees ($4.7 billion) in loans to fund its first new mill in a century.
India VIX, which measures the cost of protection against losses in the S&P CNX Nifty Index, fell 1.8 percent to 16, the steepest drop in a week. The Nifty fell 0.2 percent to 5,412.85 and its August futures settled at 5,437. The BSE-200 Index fell 0.2 percent. India’s top two bourses traded 698 million shares on Aug. 21, 21 percent less than the 12-month daily average of 889 million shares.
The Sensex has increased 15.5 percent this year, helped by record overseas investor purchases. Foreign funds bought a net $38 million of stocks on Aug. 21, the 16th consecutive day of net purchases, data from the regulator show. The gauge trades at 14 times estimated earnings, compared with the MSCI Emerging Markets Index’s valuation of 10.4 times.