India’s benchmark stock index ended little changed as opposition from the government’s key ally to economic reforms outweighed optimism that global central banks may ease monetary policy to boost growth.
The BSE India Sensitive Index, or Sensex, added less than 0.1 percent to 17,850.22 at the close, paring an advance that earlier drove up the 30-stock gauge to a six-month high. Tata Consultancy Services Ltd., the largest software maker, climbed to a record, while Reliance Industries Ltd., operator of the world’s largest oil-refining complex, fell for a fourth day. Pantaloon Retail India Ltd. dropped the most in two weeks after Mamata Banerjee, an ally of Prime Minister Manmohan Singh’s ruling coalition, said her party is opposed to foreign direct investments in multi-brand retail and airline industries.
The Sensex has risen 16 percent this year, fueled by flows from overseas investors amid optimism Singh will revive reforms to revive an economy expanding at the slowest pace in almost a decade. Standard & Poor’s and Fitch Ratings have said they may strip India of its investment-grade rating, citing risks from trade and budget imbalances.
“No policy action has been taken yet even as expectations have built up, and the parliament has not been functioning for the past three days,” B. Gopkumar, executive vice president at Kotak Securities Ltd., said by phone from Mumbai. “The market is losing some steam.”
Both houses of the parliament were adjourned for a third day after protests threatened to deepen a political deadlock that has stalled legislation on permitting overseas investments in multibrand retailing, pensions and insurance. India’s main opposition party demanded that Singh resign after a report by the chief auditor last week said the government may have lost $33 billion by not auctioning coal blocks.
The government may exceed its budget-deficit target due to higher spending on fuel subsidies and a weak economic growth outlook that could lead to a tax shortfall, the Reserve Bank of India said in a report today after market closed. The RBI left borrowing costs unchanged in July to fight inflation that has exceeded 7 percent for most of 2012. It said today that cooling prices remains the “cornerstone” of monetary policy.
“There are significant risks to deficit and revenue targets,” said Suvodeep Rakshit, an economist at Kotak Securities. “Standard & Poor’s and Fitch are watching us and if the deficit keeps slipping, then a rating downgrade will be a very credible scenario.”
Finance Minister Palaniappan Chidambaram earlier this month pledged to unveil a road map for fiscal consolidation soon. The government’s target is to pare the budget gap to 5.1 percent of GDP this fiscal year from 5.8 percent in 2011-2012 by reducing expenditure on fuel and fertilizer subsidies.
Tata Consultancy jumped 2.5 percent to 1,323.45 rupees, the highest price since its trading debut in 2004. Infosys Ltd. added 1.8 percent to 2,477.2 rupees. Wipro Ltd., the third biggest, jumped 2.4 percent to 363.1 rupees. The three stocks have a combined 14 percent weighting in the Sensex.
Reliance fell 1.7 percent to 794.5 rupees. Pantaloon Retail dropped 2.6 percent to 159.35 rupees. Retailers Shoppers Stop Ltd. declined 2.4 percent to 364.85 rupees and Trent Ltd. lost 1.9 percent to 1,060.1 rupees.
HDFC Bank Ltd, the biggest lender by value, increased 0.1 percent to 597.7 rupees.
Glenmark Pharmaceuticals Ltd. rose 1.8 percent to 413.2 rupees after the International Centre for Dispute Resolution ruled in its favor in a dispute over an anti-diarrheal drug.
India VIX, which measures the cost of protection against losses in the S&P CNX Nifty Index, rose 0.8 percent to 16.12. The Nifty rose 0.1 percent to 5,415.35 and its August futures settled at 5,450.75. The BSE-200 Index ended little changed.
Foreign funds bought a net $22 million of stocks on Aug. 22, the 17th consecutive day of net purchases, taking their investments in equities this year to $11.5 billion, data from the regulator show. That’s the most this year among 10 Asian markets tracked by Bloomberg.