Nov. 22 (Bloomberg) -- Indian stocks fell, with the benchmark index declining for a third week, as concerns the rupee will weaken further offset bullish recommendations from CLSA Asia-Pacific Markets and Credit Suisse Group AG.
Tata Motors Ltd. fell 2.4 percent, dragging the S&P BSE Auto index to a 1.2 percent decline. Cigarette maker ITC Ltd. dropped to the lowest in 11 weeks. Larsen & Toubro Ltd. advanced 1.7 percent, leading a rally in the BSE Capital Goods Index. The rupee has weakened 0.9 percent in the past three days.
The S&P BSE Sensex fell 0.1 percent to 20,217.39 at the close in Mumbai, capping a 0.9 percent weekly loss. The index erased an earlier 0.8 percent advance in the final hour of trading amid concern that a weaker rupee may force the central bank to raise borrowing costs. CLSA raised India’s weighting in its Asia Pacific ex-Japan Relative Return portfolio, while Credit Suisse wrote in a report that Indian stocks will lead the next cycle of gains in equities, with South Korea and China.
“The weakness in the rupee is not giving investors the confidence to stay in the market,” Kaushik Dani, a fund manager at Peerless Mutual Fund, which has about $460 million in assets, said by phone from Mumbai. “Some investors are booking profits.”
The rupee has lost 13 percent this year, slumping to a record low of 68.845 per dollar on Aug. 28. A weaker currency increases the cost of imports such as crude oil, fueling inflation, while increasing the value of repatriated earnings for exporters. It also limits the ability of the central bank to cut interest rates.
CLSA “will only add one more percentage point to the small India overweight in the Asia Pacific ex-Japan Relative Return portfolio, primarily because of the potential catalyst provided by forthcoming state elections,” Christopher Wood, the company’s chief equity strategist, wrote in his newsletter ‘Greed & Fear’.
Rajasthan, Madhya Pradesh, Chhattisgarh and Delhi go to the polls on Dec. 8 before national elections due next year. Goldman Sachs Group Inc. raised India to market weight from underweight on Nov. 5, saying the state polls may signal an opposition win in the 2014 federal vote, helping spur investment.
Tata Motors dropped 2.4 percent, leading the BSE Auto Index to a one-week low. ITC lost 1.4 percent, driving the BSE Fast-Moving Consumer Goods Index to a 0.6 percent advance.
Larsen jumped to 964.15 rupees, driving the S&P BSE Capital Goods Index’s 1.2 percent gain.
The Sensex fell the most since Sept. 3 yesterday and the rupee weakened after the U.S. Federal Reserve signaled monetary stimulus may be reduced in coming months. The gauge has gained 4.5 percent this year and trades at 13.3 times projected 12-month profits, the cheapest since August. The MSCI Emerging Markets Index is valued at 10.5 times estimated earnings.
International investors bought a net $17.1 million of Indian stocks on Nov. 20, a 32nd consecutive day of purchases, according to data from the market regulator. Foreign funds have bought $17.2 billion of the nation’s shares this year, the highest after Japan among 10 Asian markets tracked by Bloomberg.
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