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India Stocks Drop as Airwave Sale Shortfall Fans Deficit Concern

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Nov. 15 (Bloomberg) -- Indian stocks dropped for a fifth day, with the benchmark index completing its longest losing streak in six months, after the government failed to meet a fundraising target in a sale of mobile-phone airwaves.

The BSE India Sensitive Index, or Sensex, slid 0.8 percent to 18,471.37 at the close in Mumbai, its lowest level since Oct. 30. The market was closed yesterday for a public holiday. Infosys Ltd., the second-largest software services provider, declined to a three-month low. Tata Motors Ltd., the owner of Jaguar Land Rover, fell for a second day.

India raised 94.08 billion rupees ($1.7 billion) from an auction of second-generation mobile airwaves, the government said yesterday, less than 25 percent of its 400 billion-rupee target. Finance Minister Palaniappan Chidambaram was counting on the sale to help avert a sovereign credit-rating downgrade and narrow the budget deficit. The MSCI Asia Pacific Index fell for a sixth day today amid concerns U.S. lawmakers may fail to reach an agreement to avoid a so-called fiscal cliff of $607 billion in automatic tax increases and spending cuts next year.

“The selloff in global markets is impacting local investor sentiment,” D.K. Aggarwal, chairman of SMC Investments & Advisors Ltd., said by phone from New Delhi today. “The airwaves sale has been a dampener and has raised concern on government finances.”

Credit Rating

The S&P CNX Nifty Index fell 0.6 percent to 5,631 and its November futures settled at 5,647.95. India VIX, which gauges the cost of protection against losses in the Nifty, jumped 4.2 percent to 15.53. Trading volumes of shares in the Nifty were 13 percent more than the 30-day average, according to data compiled by Bloomberg.

Failure to meet the revenue goal from the spectrum sale may result in increased borrowing amid warnings the nation’s credit rating may be downgraded to junk by Standard & Poor’s and Fitch Ratings, Upasna Bhardwaj, an economist at ING Vysya Bank Ltd., said yesterday.

Data on Nov. 12 showed Indian industrial production unexpectedly shrank in September and the nation’s trade deficit widened to a record last month as exports declined, adding to signs Asia’s third-largest economy is struggling.

Still, India’s inflation unexpectedly eased to an eight-month low of 7.45 percent in October, data showed yesterday, compared with the median estimate of 7.9 percent in a Bloomberg survey. The cooling of prices may not last after a diesel-price increase in September.

Rate Cut

The Sensex has rallied 20 percent this year, driven by foreign inflows and government policy reforms announced since mid-September to kickstart economic growth.

Chidambaram and Prime Minister Manmohan Singh’s prescription for reviving the economy will face its first test when parliament reconvenes on Nov. 22. Opposition parties are threatening a no-confidence vote when lawmakers meet for the winter session.

“The Parliament will begin its session next week and we need to watch how the government can push reforms amid voting by the opposition,” Aggarwal said. “Investors are waiting for a positive trigger which can come in the form of a rate cut or parliamentary approval for the government’s reforms.”

Foreigners have bought a net $18.6 billion of Indian shares this year, the most among 10 Asian markets tracked by Bloomberg, excluding China.

Valuations

Overseas funds sold $4.3 million of Indian equities on Nov. 9, ending seven days of straight purchases, data from the market regulator show.

The Sensex trades at 15 times estimated earnings, compared with the MSCI Emerging Markets Index’s 11.2 times, data compiled by Bloomberg show.

Earnings for 12, or 40 percent, of the 30 companies that constitute the Sensex trailed analysts’ estimates for the quarter ended September, the same as for the June quarter, according to data compiled by Bloomberg.

Some shops were closed and offices saw fewer attendances in the nation’s financial capital, Mumbai, amid concerns of violence by supporters of ailing Shiv Sena party chief Bal Thackeray. Media reports have said he’s in a critical condition and on a life support machine at his residence, while party and family members described his condition as stable. Thackeray, 86, is a Hindu-nationalist politician whose party campaigns against migrant workers and western cultural imports in Mumbai and the Indian state of Maharashtra.

Infosys, which gets 98 percent of its sales from abroad, declined 1.8 percent to 2,296.3 rupees. Larger rival Tata Consultancy Services Ltd. retreated 2.4 percent to 1,294.15 rupees. Wipro Ltd., the third-biggest, shed 2 percent to 361.75 rupees.

Tata Motors fell 1.9 percent to 272.25 rupees. ITC Ltd., the largest cigarette company, retreated 2.6 percent to 276.45 rupees. Tata Steel Ltd., the biggest producer of the alloy, tumbled 2.7 percent to 375.4 rupees.

To contact the reporter on this story: Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

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