India’s Sensex Retreats to 4-Month Low as Rupee Slides to Record

India’s benchmark stock index fell to a four-month low after the rupee slid past 64 per dollar for the first time. Stocks tied to the economy paced the declines.

Tata Motors Ltd., the nation’s biggest truckmaker, dropped the most in six months. Oil & Natural Gas Corp. retreated to an eight-month low. Sterlite Industries (India) Ltd. and Sesa Goa Ltd., owned by billionaire Anil Agarwal, jumped on optimism the government will expedite a plan to sell its stakes in the companies’ units Hindustan Zinc and Bharat Aluminium Co.

The S&P BSE Sensex dropped 0.3 percent to 18,246.04, its lowest close since April 12. The measure has fallen 10 percent from this year’s high set on July 23 amid concern the government efforts to steady the rupee will curb economic growth. Foreign funds have pulled about $12 billion from local stocks and bonds while the currency has plunged 12.3 percent since May 22, when Federal Reserve Chairman Ben S. Bernanke signaled the U.S. may reduce monetary stimulus if the economy improves.

“A lack of confidence and some very bad measures from the regulators have caused foreign investors to become jittery,” Neelkanth Mishra, head of Indian equity strategy at Credit Suisse Group AG, told Bloomberg UTV today. “What’s happening right now is the equivalent of a run on the bank.”

Citigroup Inc. cut its year-end forecast for the Sensex to 18,900 from 20,800 in a report dated today and JPMorgan Chase & Co. downgraded Indian equities to neutral from overweight.

Tata Motors retreated 4.6 percent to 287.95 rupees, the biggest decline since Feb. 1. Tractor maker Mahindra & Mahindra Ltd. declined 2.3 percent to 791.5 rupees, dragging the S&P BSE Auto Index to its lowest level since April 15. ONGC decreased 2 percent to 256.6 rupees, the lowest price since Dec. 24.

Earnings Outlook

Economic slowdown and a weak currency is hurting company earnings. Combined profits for the 30 companies in the Sensex increased 1.4 percent in the three months ended June compared with an estimate of 5.8 percent before the reporting season began, Bank of America Corp. analysts Jyotivardhan Jaipuria and Anand Kumar wrote in a report dated yesterday.

About 47 percent of Sensex companies that posted earnings for the June quarter missed analyst estimates. That compares with 27 percent for the March quarter, and 43 percent in the three months ended December, data compiled by Bloomberg show.

“It appears we’re not going to see any growth in earnings for this fiscal year” ending March 2014, Manish Sonthalia, who manages about $200 million in equities at Motilal Oswal Asset Management Co. in Mumbai, told Bloomberg TV India today.

Sterlite, Sesa Goa

Sterlite, the nation’s top copper producer, surged 9.8 percent to 83.10 rupees, the most since May 2009. Sesa Goa, an iron ore miner, soared 16 percent to 151.1 rupees, the most since September 2005. Hindustan Zinc Ltd., of which the government owns 29.5 percent, gained 13 percent to 119.2 rupees. Sterlite owns 64.9 percent in the zinc producer.

“The government is in need of money to cut its rising current account deficit so it appears there will be extra effort to push the stake sale through,” said Abhisar Jain, an analyst at Centrum Broking Pvt. in Mumbai. “Vedanta merged Sesa and Sterlite and the merged entity will benefit from the cash surplus that Hindustan Zinc has but hasn’t been able to use.”

State Bank of India rose 1.5 percent to 1,554.05 rupees, rebounding from the lowest level since May 2009. ICICI Bank Ltd. increased 1.9 percent to 830.4 rupees. The 13-member S&P BSE Bankex added 0.8 percent, ending its steepest two-day loss since February 2009.

“We are seeing some value buying,” Chokkalingam G, who oversees 1.4 billion rupees as Centrum Wealth Management Ltd.’s chief investment officer, said by phone today.

Fund Flows

The Sensex has lost 6.1 percent this year and trades at 12.9 times projected 12-month earnings, compared with the MSCI Emerging Markets Index’s 9.9 times.

International investors sold a net $105 million of Indian shares on Aug. 19, data from the regulator show. That pared this year’s inflow to $12.5 billion, the data show.

The CNX Nifty Index decreased 0.3 percent to 5,401.45, its lowest close since Sept. 11. India VIX, which gauges the cost of protection against losses in the Nifty, surged 6.4 percent. Volume on the Sensex was 88 percent higher than the 30-day average, data compiled by Bloomberg show .

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