Indian stocks declined the most in about two weeks amid concern a faster-than-estimated expansion in factory output may reduce the scope for monetary easing.
The S&P BSE Sensex dropped 0.4 percent to 19,564.92 at the close, its steepest drop since Feb. 28. Volumes were 20 percent below the 30-day average. Tata Power Co., India’s top generator outside government control, slid 3 percent after the stock was downgraded by Credit Suisse Group AG. HDFC Bank Ltd., the most valuable lender, retreated 1.7 percent.
Industrial production in January climbed 2.4 percent from a year ago after a revised 0.5 percent drop in December, data from the government showed today. The median of 28 estimates in a Bloomberg survey was for a 1.3 percent gain. Inflation data for February are due on March 14 and the Reserve Bank of India meets for its next policy review on March 19.
“It looks like hopes for a 50-basis point cut next week have been tempered, and at best, we will only have a 25-basis point reduction,” Alex Mathews, head of research at Geojit BNP Paribas Financial Services Ltd., said by phone from Kochi in southern India today. “Some investors would also like to take a hard look at the inflation number before buying.”
The Reserve Bank of India cut its benchmark rate 25 basis points to 7.75 percent on Jan. 29, the first reduction in nine months. That’s still the highest among major Asian nations.
Tata Power slid 3.1 percent to 98.05 rupees after it was cut to underperform from neutral by Credit Suisse. HDFC Bank lost 1.7 percent to 644 rupees. Bharti Airtel Ltd., India’s largest cell-phone operator, slid 2.1 percent to 314.55 rupees.
Bharat Heavy Electricals Ltd., the biggest power-equipment maker, retreated 2.3 percent to 200.75 rupees. Bajaj Auto Ltd., India’s second-largest motorcycle maker, fell 1.5 percent to 1,955.95 rupees. Sterlite Industries (India) Ltd., the nation’s largest copper producer, lost 1.4 percent to 98.65 rupees, and aluminum maker Hindalco Industries Ltd. retreated 1.2 percent.
Reserve Bank Governor Duvvuri Subbarao has said that risks from elevated prices and a record current-account gap may limit the extent he can reduce borrowing costs. Wholesale inflation probably eased to 6.6 percent in February, a Bloomberg survey shows before a report due March 14. Consumer prices rose 10.91 percent last month from a year earlier, one of the highest rates in the world, another report showed today.
Car producers such as Maruti Suzuki India Ltd. are bracing for the first industry-wide annual sales drop in a decade amid high borrowing costs. Local deliveries fell 4.6 percent to 1.71 million cars in the 11 months ended in February, Society of Indian Automobile Manufacturers data shows.
The 50-stock CNX Nifty Index decreased 0.5 percent to 5,914.1. Its March futures settled at 5,937.25. India VIX, which measures the cost of protection against losses in the Nifty, jumped 6.2 to 15.13.
The Sensex is valued at 13.8 times projected 12-month profits, compared with 14.3 times on Jan. 25, when the gauge climbed to a two-year high, data compiled by Bloomberg show. That compares with the MSCI Emerging Markets Index’s 10.7 times.
Foreigners bought a net $185.4 million worth of shares on March 11, taking their net investment in Indian equities this year to $9.2 billion, a record for the period, data compiled by Bloomberg show. They bought a net $24.5 billion worth of shares last year, the most among 10 Asian markets tracked by Bloomberg.