Indian stocks plunged the most in 14 months on speculation a weakening currency may stoke inflation and prompt overseas investors to pare holdings of local shares.
The S&P BSE Sensex sank 2.3 percent to 19,760.30 at the close in Mumbai, the most since March 22, 2012. That cut its gain this month to 1.3 percent. Drugmaker Sun Pharmaceutical Industries Ltd. and cigarette maker ITC Ltd. fell from record highs. Mortgage lender Housing Development Finance Corp. sank 3.9 percent. The rupee completed its worst month in a year.
Global funds have been net sellers of rupee-denominated bonds each day since holdings touched a record $38.5 billion on May 21, exchange data show, while they have bought a net $15.2 billion of local shares this year. Asia’s third-largest economy should be prepared for the probability of outflows in 2014 as developed nations consider tapering stimulus measures, Reserve Bank of India Governor Duvvuri Subbarao said this month.
“The rupee’s depreciation is a big concern and it set off a panic reaction,” Chokkalingam G, chief investment officer at Centrum Wealth Management Ltd., said in a phone interview from Mumbai. “There’s concern foreign investors will start exiting the market if the rupee continues to weaken.”
The Sensex has slumped 2.6 percent since climbing to its highest level since Jan. 5, 2011, on May 17. The measure has still advanced 1.7 percent in 2013 as monetary easing by global central banks boosted flows into emerging markets. Foreigners bought a net $3.9 billion of local stocks this month through May 30, the highest since February when they purchased a net $4.1 billion, data compiled by Bloomberg show.
Sun Pharmaceutical slid 2.8 percent to 1,044.10 rupees. The stock has surged 42 percent this year, the most on the Sensex. ITC lost 2.6 percent to 339.90 rupees and was the biggest drag on the gauge. Tractor maker Mahindra & Mahindra Ltd. lost 3.7 percent to 967.55 rupees after closing at a record yesterday.
The Sensex is valued at 13.6 times projected 12-month profits, compared with the MSCI Emerging Markets Index’s 10.3 times. Volume on the gauge was 8 percent lower than the 30-day average. The CNX Nifty Index on the National Stock Exchange of India lost 2.3 percent to 5,985.95. Its June futures settled at 6,000.05. India VIX surged 5.9 percent to 16.99.
India’s gross domestic product grew a decade-low 5 percent in the 12 months ended March 31, below the 10-year average of about 8 percent, official data showed today. The GDP expanded 4.8 percent in the January to March quarter from a year earlier, matching the median of 33 estimates in a Bloomberg survey.
“GDP numbers told us there’s not much to look forward to and growth is likely to remain sluggish,” Tirthankar Patnaik, a Mumbai-based strategist with Religare Capital Markets Ltd., said on Bloomberg TV India. “We were getting cautious because the currency and stocks were not moving in tandem.”
The rupee has weakened 4.8 percent this month, its biggest drop since May 2012, according to data compiled by Bloomberg. The currency retreated 0.2 percent today, touching the weakest level since June 28, 2012, and fell 1.5 percent this week. The Dollar Index, which tracks the greenback against six major trading partners, rose 1.8 percent this month.
HDFC tumbled 3.9 percent to 890.15 rupees, the most since Oct. 5. HDFC Bank Ltd., India’s most valuable bank that closed at a record yesterday, slumped 3.4 percent to 700.50 rupees in its biggest decline since Dec. 16, 2011. Reliance Industries Ltd., owner of the world’s largest refining complex, sank 3.6 percent to 806.30 rupees, and Bharti Airtel Ltd., the largest Indian mobile-phone operator, tumbled 4.3 percent to 301.95 rupees.