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India’s Sensex Drops to 4-Month Low; Tata Motors Leads Decline

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March 21 (Bloomberg) -- Indian equities fell for the fifth day, with the benchmark index retreating to its lowest level in four months. Automakers and energy companies paced the decline that gathered momentum in the last hour of trade.

The S&P BSE Sensex dropped 0.5 percent to 18,792.87, the lowest close since Nov. 26, with volumes 17 percent above the 30-day average. The gauge changed direction 11 times, erasing an intraday gain of 1.1 percent. Tata Motors Ltd., the owner of Jaguar Land Rover, retreated to the lowest level since Dec. 4. Reliance Industries Ltd., the owner of the world’s largest refining complex, declined to a two-week low.

A Tamil political party that quit Prime Minister Manmohan Singh’s alliance on March 19 accused his government of using federal investigators in a political vendetta after a raid on the home of a senior leader. Parliament adjourned amid protests over the raid, renewing concerns the government’s ability to pass a series of reforms to revive growth would be undermined.

“People who took positions on hopes that the government is making efforts to take the economy forward gave up,” Deven Choksey, managing director at Mumbai-based K.R. Choksey Shares & Securities Pvt., said by phone. “The intraday rally fizzled out as the political situation remains uncertain. There are too many negatives right now.”

Tata Motors sank 4.2 percent to 273.60 rupees, the lowest level since Dec. 4. Reliance lost 1.2 percent to 812.60 rupees, the lowest price since March 4. Bajaj Auto Ltd., the country’s second-largest motorcycle maker, slid 4.6 percent to 1,755.3 rupees. HDFC Bank Ltd., the biggest lender by value, retreated 3 percent to 607 rupees.

Industrials Weaken

Larsen & Toubro Ltd., the nation’s biggest engineering company, declined 2.9 percent to 1,394.4 rupees. Tata Steel Ltd. decreased 2.1 percent to 327.85 rupees. Hindustan Unilever Ltd. retreated 1.7 percent to 460.8 rupees and cigarette maker ITC Ltd. lost 0.7 percent to 305 rupees.

Federal investigators today carried out searches at the residence of M.K. Stalin, son of the Dravida Munnetra Kazhagam chief Muthuvel Karunanidhi in Chennai, capital of the southern state of Tamil Nadu. DMK’s exit has left Singh’s coalition 44 seats short of parliamentary majority, adding to the challenge of implementing policies to speed up foreign investment, boost capital inflows and cut subsidies.

“Investors are concerned about the direction of India’s economic growth and the fact that many of the long-term issues are not getting resolved,” Neelkanth Mishra, head of Indian equity strategy at Credit Suisse Group AG, said in an interview with Bloomberg TV India today. “The political uncertainty has not helped. The mood is still very cautious.”

Overseas funds turned net sellers of Indian stocks for the first time in 14 days yesterday, disposing a net $29.4 million of shares, data from the market regulator show. They have still bought a net $9.78 billion of shares this year, the data show.

The Sensex has retreated 3.3 percent this year and trades at 12.7 times projected 12-month profits, compared with the MSCI Emerging Markets Index’s 10.4 times.

The 50-stock CNX Nifty Index fell 0.6 percent to 5,658.75. Its March futures settled at 5,664.45. The India VIX, the benchmark measure for options prices, fell 0.9 percent.

To contact the reporter on this story: Santanu Chakraborty in Mumbai at schakrabor11@bloomberg.net

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

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