March 20 (Bloomberg) -- Indian stocks dropped to the lowest level in more than three weeks in New York, following declines in the S&P BSE Sensex after Prime Minister Manmohan Singh’s chief ally withdrew its support for the government.
The Bank of New York Mellon Corp. index of Indian companies’ American depositary receipts slipped 1.6 percent to 1,093.73 in New York, the lowest level since Feb. 21. ADRs of Sterlite Industries (India) Ltd., the nation’s biggest copper producer, retreated 5.4 percent as the metal tumbled, while automaker Tata Motors Ltd. slumped 3.1 percent in U.S. trading. ICICI Bank Ltd. ADRs slid to the lowest level since November.
The benchmark Sensex gauge retreated to a three-week low in Mumbai yesterday after the Dravida Munnetra Kazhagam said it would stop supporting Singh’s administration. The withdrawal, which leaves Singh reliant on support from regional parties to pass legislation, came as the Reserve Bank of India cut the repurchase rate to 7.5 percent from 7.75 percent and said the scope for further reductions is limited.
“It’s disappointing,” Gregory Lesko, managing director at Deltec Asset Management LLC where he helps manage about $750 million, said in a phone interview yesterday in New York. “Reform is certainly lacking, investment is lacking and a lot of that has to do with the government.”
The Sensex fell 1.5 percent to close at 19,008.10 yesterday, the steepest one-day decline since Feb. 28.
The DMK, with 18 lawmakers in the 545-member lower house of parliament, stopped its support over the government’s approach to alleged war crimes in Sri Lanka. The Tamil Nadu state-based party signaled reconciliation is possible should its demands be met. The government is stable and there is no crisis, Finance Minister Palaniappan Chidambaram said in New Delhi.
The central bank cut interest rates for the second time this year to bolster the weakest economic growth in a decade. Thirty of 35 analysts in a Bloomberg survey predicted the move and the rest projected no change. A 25 basis point, or 0.25 percentage point, reduction Jan. 29 was the first cut since April.
Foreign funds have purchased a record net $9.8 billion of Indian stocks in 2013, according to data compiled by Bloomberg, amid government efforts to reform the economy by paring subsidies, allowing higher foreign direct investment and speeding up infrastructure projects. Overseas funds bought a net $24.5 billion of shares last year, the most among 10 Asian markets tracked by Bloomberg, helping the Sensex to its biggest annual advance in three years.
The stock gauge has declined 2.2 percent this year, the third-worst performing benchmark index among Asian nations after Malaysia and Hong Kong. The measure is valued at 12.9 times projected 12-month profits, the cheapest level in four months, data compiled by Bloomberg show.