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India’s Sensex Declines for Fifth Day Before Inflation Re

Indian stocks dropped for a fifth day before a report tomorrow that may show inflation quickened last month, reducing the scope for the central bank to loosen monetary policy. Consumer-goods makers lead the declines.

The BSE India Sensitive Index, or Sensex, fell 0.7 percent to 19,229.26 at the close, a two-week low. Cigarettes-to-hotels group ITC Ltd. slid the most in three months after the stock’s weight was cut by FTSE in its global equity index. Hindustan Unilever Ltd., the biggest home-products maker, had the biggest two-day loss in 10 months.

Stocks fell yesterday as data showing consumer-price index quickened last month raising concern the central bank may not lower interest rates next week. A report may show tomorrow the wholesale-price index quickened to 7.60 percent last month from 7.45 percent in October, according to a Bloomberg survey. The Reserve Bank of India will keep borrowing costs unchanged on Dec. 18, according to another Bloomberg survey.

“Persistently high inflation will prevent the RBI from lowering benchmark rates at least until January,” Sailav Kaji, a director of institutional equities and chief strategist at Padmakshi Financial Services Ltd., said by phone from Mumbai. “Valuations are starting to look a bit stretched, given that there may not be immediate policy measures to boost growth.”

The Sensex has increased 24 percent this year, bound for its biggest annual rally since 2009, after steps taken by Prime Minister Manmohan Singh to open the nation to more overseas investment since mid-September attracted offshore funds. The Sensex trades at 15.2 times estimated earnings, compared with a multiple of 12 for the MSCI Emerging Markets Index.

FTSE Weighting

ITC sank 3.5 percent to 295.25 rupees, the biggest drop since Sept. 17 and the worst performance on the Sensex. The shares were also the fourth-largest loser in the MSCI Emerging Markets Index. FTSE pared the stock’s weight to 24 percent from 75 percent, according to its website.

Larsen & Toubro Ltd. lost 1.3 percent to 1,626.70 rupees, the lowest close since Nov. 27. Hindustan Unilever dropped 1.9 percent to 519.75 rupees. The stock has lost 4.6 percent in two days, the biggest such loss since Feb. 7.

Copper producer Sterlite Industries (India) Ltd. slid 3.3 percent to 109.4 rupees, the most since Sept. 27.

The S&P CNX Nifty Index retreated 0.6 percent to 5,851.5, a third day of losses. Volumes on the 50-stock gauge were 17 percent higher than the 30-day average at the close, according to data compiled by Bloomberg. The 246-member BSE Mid-Cap Index slid 1.2 percent, the most since Oct. 10.

Data showed yesterday that the consumer-price index rose 9.9 percent from a year earlier, compared with October’s 9.75 percent gain. The RBI will be “more focused” on wholesale inflation data before deciding on borrowing costs, Chakravarthy Rangarajan, chief economic adviser to the prime minister, told Bloomberg TV India yesterday. The central bank has signaled it may cut borrowing costs next quarter if inflation eases.

Overseas funds were net buyers of local stocks for a 20th straight day on Dec. 12, purchasing $556.4 million of shares. That took their net purchases in 2012 to $22 billion, the most among 10 Asian markets tracked by Bloomberg, excluding China, data compiled by Bloomberg show.

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