Indian stocks tumbled the most in more than a week, with the benchmark index ending a three-day climb, as the weakening of the nation’s currency to a record spurred concern capital outflows may accelerate.
HDFC Bank Ltd. plunged the most in more than four years, dragging a measure of 13 lenders to a 19-month low. Larsen & Toubro Ltd., India’s largest engineering company, declined to its lowest level since January 2012. Power-equipment producer Bharat Heavy Electricals Ltd. slumped 10 percent. The rupee closed at an all-time low of 66.19 per dollar.
The S&P BSE Sensex sank 3.2 percent to 17,968.08 at the close in Mumbai. The measure has fallen 11.5 percent from this year’s high on July 23 on concern steps to stem a record slide in the rupee will weigh on economic growth. Global funds have pulled $12 billion from local equities and bonds since June 1, fueling the currency’s slide, data compiled by Bloomberg show.
“The sharp fall in the rupee is what’s worrying investors the most,” Rahul Chadha, co-chief investment officer at Mirae Asset Global Investments Hong Kong Ltd., which has $40 billion in equities, said on Bloomberg TV today. “Most foreigners are overweight on India and their risk managements’ are actively questioning the huge overweight position.”
The rupee has depreciated 17 percent this year. That means dollar-based investors have lost 23 percent from Sensex shares this year, data compiled by Bloomberg show. The gauge has slid 7.5 percent in local currency terms this year.
The currency also fell on concern India’s current-account deficit will worsen as oil prices climb amid political tensions in the Middle East. The U.S. said yesterday President Barack Obama will hold Syria accountable for using chemical weapons against its people, fanning concern unrest in the region will disrupt fuel supplies.
Brent crude climbed 3 percent in August, raising costs for Asia’s third-largest economy that buys almost 80 percent of its oil abroad. India is also the world’s top buyer of gold, the price of which gained 14 percent this quarter. Costlier imports are adding pressure on India’s balance of payments at a time when the prospect of a cut in U.S. stimulus is fueling fund outflows.
HDFC Bank plunged 8.1 percent to 561.9 rupees, the most since Jan. 7, 2009. State Bank of India decreased 2.4 percent to 1,520 rupees, its lowest level since May 2009. ICICI Bank Ltd. slid 3.4 percent to 802.6 rupees. The S&P BSE Bankex lost 5.3 percent to its lowest close since January 2012. Mortgage provider Housing Development Finance Corp. slumped 7.8 percent to 686 rupees, the biggest fall since July 2009.
ITC Ltd., India’s biggest cigarette company which has the highest weighting on the Sensex, tumbled 3.1 percent to 297.9 rupees. Hindustan Unilever Ltd., the largest household products maker, lost 2.1 percent to 595.55 rupees. Sun Pharmaceutical Industries Ltd., the country’s top drugmaker by market value, lost 3.9 percent to 496.85 rupees.
“The decline in quality and defensive stocks shows loss of patience by foreign investors,” said Taher Badshah, senior vice president and co-head equities at Motilal Oswal AMC Ltd., which has $300 million in assets. “Negativism is spreading to more stocks and sectors.”
International investors sold Indian stocks for a sixth day on Aug. 26, offloading a net $86.1 million of shares, data from the market regulator showed yesterday. That pared this year’s net inflow to $11.8 billion, still the second-largest among 10 Asian markets tracked by Bloomberg.
Oil & Natural Gas Corp., India’s largest state-owned oil explorer, retreated 3.3 percent to 259.3 rupees. Tractor maker Mahindra & Mahindra Ltd. retreated 2.3 percent to 789.4 rupees and Maruti Suzuki (India) Ltd. slumped 3.7 percent to 1,260.25 rupees, its lowest since Sept. 13. Larsen & Toubro lost 5.5 percent to 705.65 rupees. Bharat Heavy retreated 10 percent to 111.25 rupees, ending a four-day, 6.7 percent advance.
The passage of a bill that expands the world’s biggest food program, a key plank of Prime Minister Manmohan Singh’s re-election strategy, also weighed on sentiment. The food bill, which gives subsidized grain to two-thirds of the country’s 1.2 billion people, is estimated to cost about $19.5 billion in subsidies annually at a time when the government is running budget and current-account deficits.
“It’s not wise to take measures which add to that deficit on an ongoing basis,” Geoff Lewis, global market strategist at JPMorgan Asset Management in Hong Kong, said on Bloomberg TV India interview today. The food bill will “not be helpful.”
The government is taking steps to contain the shortfall in the current account, the broadest measure of trade, to within $70 billion in the year through March 2014, compared with a record $87.8 billion the previous period, Finance Minister Palaniappan Chidambaram said in New Delhi today.
The CNX Nifty on the National Stock Exchange slumped 3.5 percent to 5,287.45. India VIX, which measures the cost of protection against losses in the Nifty, soared 12 percent.
The Sensex trades at 12.8 times projected 12-month profits, compared with 17.8 times in November 2010 when the 30-stock gauge climbed to an all-time high. The MSCI Emerging Markets Index’s trades at 9.8 times.
“We see some excellent value opportunities, but at this point of time I don’t think value is going to stabilize the market,” Robert Aspin, Standard Chartered’s head of global equity investment strategy, said in an interview to Bloomberg TV India. “There’s a risk of a ratings downgrade, and if that happens there will be further foreign fund outflows.”