Indian stocks retreated for the fourth day this week, led by lenders and carmakers. A gauge of volatility climbed to more than a four-month high.
The S&P BSE Sensex lost 0.7 percent to 19,427.56 at the close in Mumbai, taking the weekly drop to 1.3 percent. ICICI Bank Ltd. and HDFC Bank Ltd. were among the biggest losers on the index after the central bank said it is “collecting information” on reports of money laundering by the lenders. The banks said yesterday they are probing the report. Tata Motors Ltd. and Maruti Suzuki India Ltd. declined on concern slowing sales will erode their profits.
India’s non-food inflation eased last month even as the benchmark gauge accelerated from a three-year low, government data showed yesterday, sustaining scope for the Reserve Bank of India to reduce rates on March 19. The 30-day volatility in the Sensex was at 12.9, the highest since Oct. 29, data compiled by Bloomberg show.
“The market is at a critical juncture with conflicting signals leading to higher volatility,” Jitendra Panda, head of broking at Capital First Ltd., said in a phone interview today. “Core inflation has fallen, while overall inflation is still high. The bulls and bears are fighting a hard battle.”
Fifteen of 16 economists surveyed by Bloomberg forecast the central bank will cut the benchmark repurchase rate to 7.5 percent from 7.75 percent next week. Governor Duvvuri Subbarao last cut the repurchase rate by 25 basis points on Jan. 29 and signaled lingering price pressures and risks such as a record current-account gap left limited space for further easing.
ICICI Bank tumbled 3.9 percent to 1,067.5 rupees, the most since Feb. 28. HDFC Bank slid 1.5 percent to 639.4 rupees. Axis Bank Ltd. lost 1 percent to 1,339.85 rupees, its lowest closing price since Dec. 21. The three lenders are running a nationwide “money laundering racket,” which has violated multiple rules including tax and banking regulations, news website Cobrapost reported yesterday after a sting operation.
Reserve Bank Deputy Governor Urjit Patel said after the market closed yesterday the authority is “in touch” with the banks. No notices have been issued, he said.
Maruti Suzuki fell 0.9 percent to 1,406.7 rupees. Tata Motors slumped 3.3 percent to 291.1 rupees. The stock tumbled 4.2 percent this week after the company said March 12 sales of Jaguar Land Rover dropped 22 percent last month in China, its biggest market. Indian carmakers are bracing for their first industrywide annual sales drop, with local deliveries having fallen 4.6 percent to 1.71 million units in the 11 months ended February, data from the producers’ group show.
Reliance Industries Ltd., owner of the world’s largest refining complex, lost 1.9 percent to 843.65 rupees. GAIL India Ltd., the nation’s largest gas supplier, plunged 2.8 percent to 323.3 rupees. Bharti Airtel Ltd., India’s largest mobile-phone operator, dropped 1.4 percent to 310.3 rupees.
The S&P CNX Nifty Index of the National Stock Exchange of India lost 0.6 percent to 5,872.65 Its March futures settled at 5,901. India VIX, which measures the cost of protection against losses in the Nifty, sored 3.4 percent to 15.16.
Foreign funds bought a net $105 million worth of shares yesterday, a 10th day of inflows, data from the regulator show. They’ve purchased $9.5 billion of stocks this year, a record for the period, data compiled by Bloomberg show, amid efforts by the government to reform the economy by cutting subsidies, allowing higher foreign investment and hastening infrastructure projects in a bid to revive growth.
The Sensex is valued at 13.2 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 10.6 times.