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Indian Stocks Tumble as Rupee Drop Stokes Rate-Cut Concerns

Indian stocks slid to a seven-week low amid concern the rupee’s slump to a record will limit the central bank’s scope to cut interest rates next week.

The S&P BSE Sensex declined 1.5 percent to 19,143 in Mumbai, its lowest close since April 18. Volume on the gauge was 64 percent more than the 30-day average. Jindal Steel & Power Ltd. plunged the most in more than five years after the federal investigator said it has registered a case against the company. Mahindra & Mahindra Ltd. led automobile producers lower after data showed industry-wide sales contracted in May.

The rupee reached its weakest level today, weighed down by a record current-account gap, the slowest economic growth in a decade and speculation the dollar will gain if the U.S. reduces monetary stimulus. The Reserve Bank of India, which has cut the repurchase rate thrice this year, will keep it at 7.25 percent on June 17, according to 10 of 18 analysts in a Bloomberg News survey. The rest forecast a 25 basis-point reduction.

“We didn’t expect the rupee to weaken as it has over the last few weeks,” Robert Aspin, a Singapore-based investment strategist with Standard Chartered Bank, said in an interview with Bloomberg TV India today. A weak currency will stoke price pressures, impacting “the ability of the Reserve Bank of India to cut rates. We were looking for a 25-basis point cut.”

The rupee, the worst-performing Asian currency in the past month, touched a record low of 58.9850 per dollar. The currency may drop past 60 in a “sustained manner,” CLSA Asia-Pacific Markets economist Rajeev Malik wrote in an e-mail.

Bond Sale

The rupee rebounded to close 0.4 percent weaker at 58.395 after the government said it is considering an overseas bonds sale to spur inflows and on speculation the RBI sold dollars. The nation is weighing measures including a debt offering to citizens living abroad, Raghuram Rajan, the top adviser at the finance ministry, told reporters in New Delhi.

Jindal Steel & Power tumbled 15 percent to 226.15 rupees, the most since Jan. 21, 2008, after the federal investigator registered a case against the company in coal-allocation case. Searches are being carried out at 15 locations, Dharini Mishra, spokeswoman for the Central Bureau of Investigation, said in a text message. The company will cooperate with the probe, Manu Kapoor, head of external affairs, said by e-mail.

Tata Steel Ltd., India’s biggest producer, declined 3.2 percent to 281.2 rupees, its lowest close since May 2009.

ICICI Bank Ltd. retreated 3.7 percent to 1,076.5 rupees, its third day of loss. Mortgage provider Housing Development Finance Corp. decreased 2.5 percent to 831.15 rupees.

Vehicle Sales

Mahindra & Mahindra retreated 3 percent to 946.9 rupees. Carmaker Maruti Suzuki India Ltd. slid 2.1 percent to 1,490.45 rupees. Tata Motors Ltd., the owner of Jaguar Land Rover, fell 1 percent to 293.15 rupees, its fourth day of loss. Passenger vehicle sales decreased 9 percent in May, the Society of Indian Automobile Manufacturers said in New Delhi today.

Central bank Governor Duvvuri Subbarao said May 30 that the weakness in the rupee may stoke inflation and increase the cost of servicing foreign-currency debt. Data due tomorrow may show consumer prices increased 9 percent in May, according to a Bloomberg survey of 22 economists. The rate hasn’t slowed to less than 9 percent since February 2012.

Wholesale prices accelerated 4.86 percent in May, data on June 14 may show, after a 4.89 percent increase in April, the least since November 2009.

Today’s drop in Indian equities reflected losses in other Asian markets. The MSCI Emerging Markets Index decreased 1.6 percent, headed for the lowest level since Sept. 6, led by the biggest declines in Philippine, Thai and Indonesian stocks since 2011, as currencies weakened amid concern U.S. policy makers will reduce stimulus.

EM Stocks

The Philippine Stock Exchange Index slumped 4.6 percent, its steepest loss since September 2011. Thailand’s SET Index dropped 5 percent and the Jakarta Composite Index, Indonesia’s benchmark measure, lost 3.5 percent. Chinese companies listed in Hong Kong slid for a 10th day, the longest losing streak since 1995. The Philippine peso weakened, sending the Bloomberg-JPMorgan Asia Dollar Index to a nine-month low.

The Sensex reached a two-year high on May 17 as monetary stimulus from central banks from the U.S. to Europe and Japan boosted flows to emerging markets, including India. The gauge has since slid 5.6 percent and trades at 13.2 times projected 12-month profits. The MSCI Emerging Markets Index is valued at a multiple of 9.9.

Overseas funds still bought $36 million of local shares on June 10, data from the regulator show. That took this year’s net investment to $15.4 billion, a record for the period, data compiled by Bloomberg show.

The 50-stock CNX Nifty index on the National Stock Exchange of India Ltd. sank 1.5 percent to 5,788.80. Its June futures settled at 5,801.65. India VIX climbed 7.6 percent.

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