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India’s Sensex Drops to 3-Week Low as Rupee Weakens; Banks Fall

Bombay Stock Exchange
The Bombay Stock Exchange (BSE) building is illuminated during a special holiday trading session marking the occasion of Diwali in Mumbai. Photographer: Dhiraj Singh/Bloomberg

Indian stocks fell for a fifth day as the drop in the rupee to an eight-week low spurred concerns capital inflows will slow and deter the central bank from easing liquidity curbs.

State Bank of India, the nation’s biggest lender, fell to a two-week low, leading a gauge of lenders lower for the sixth day. Engineering company Larsen & Toubro Ltd. dropped the most in three weeks. Drugmaker Dr Reddy’s Laboratories Ltd. advanced the most on the benchmark gauge. The rupee slid to as low as 63.4450 per dollar, the weakest level since Sept. 18.

The S&P BSE Sensex retreated 0.9 percent to 20,490.96 at the close in Mumbai. The gauge tumbled 2.7 percent last week as the currency completed its largest weekly loss in more than two months on concern the U.S. Federal Reserve will cut stimulus earlier than anticipated. American payrolls added almost twice as many workers projected in October, data showed on Nov. 8. The MSCI Emerging Markets Index fell for an eighth straight day.

“The concern over tapering and its impact on countries with current-account deficits is gradually creeping back into the market,” Tai Hui, chief Asia market strategist at JPMorgan Asset Management in Hong Kong, told Bloomberg TV India today.

State Bank declined 2.3 percent. Yes Bank Ltd. tumbled 5.9 percent, the most since Sept. 23. The S&P BSE Bankex lost 1.4 percent to close at its lowest level since Oct. 18.

Larsen & Toubro decreased 3.2 percent, the most since Oct. 17. Tata Motors Ltd., owner of Jaguar Land Rover, dropped 1.8 percent, after CLSA Asia-Pacific Markets cut its recommendation on the stock to outperform from buy.

Dr Reddy’s jumped 2.9 percent, the biggest advance since Oct. 30, after the company received approval from the U.S. Food and Drug Administration for generic versions of aciphex tablets to treat astroesophageal reflux disease.

‘Tactical Play’

The Sensex rallied 19 percent from this year’s low on Aug. 21 to a record in a special Diwali trading on Nov. 3. The gauge has dropped every day since. Its 5.5 percent climb this year is still the most among the four largest emerging markets, as more companies reported profits that beat estimates and as stimulus helped spur $2.9 billion of net inflows into shares last month.

“Investors were using tapering, or the lack of it, as a tactical play to get into emerging markets,” JPMorgan’s Hui said. “It wasn’t surprising to see the Sensex hit a record. I question whether that rally is sustainable, with the tapering discussion returning to the fore.”

Fed policy makers will cut the monthly pace of bond-buying to $70 billion at their March 18-19 meeting, according to the median estimate of 32 economists in a Bloomberg survey Nov. 8. An Oct. 17-18 survey of 40 economists also forecast a reduction to $70 billion in March.

Economic Data

The Sensex was also pressured before a report tomorrow forecast to show consumer-price inflation quickened last month.

Consumer prices rose 9.9 percent in October from a year earlier, compared with 9.84 percent in September, according to the median of 28 estimates in a Bloomberg survey. Factory output rose 3.5 percent in September, after a 0.6 percent gain the previous month, a separate Bloomberg survey shows.

“We don’t see buying emerging unless data this week show the economy is getting back on track,” Surya Narayan Nayak, an analyst at Networth Stock Broking Ltd., said by phone today.

The Sensex is valued at 13.6 times projected 12-month profits, compared with 10.4 times for the MSCI Emerging Markets Index, data compiled by Bloomberg show.

Global investors bought a net $57 million of equities on Nov. 8, a 25th day of net purchases, data from the regulator show. That took this year’s inflows to $16.6 billion, the most in Asia after Japan.

The CNX Nifty Index decreased 1 percent to 6,078.80. The India VIX rose 1.7 percent.

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