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India’s Sensex Drops for Third Day as Tata Motors, Larsen Slide

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Jan. 3 (Bloomberg) -- Indian equities declined, led by automobile makers and engineering companies, as the benchmark index retreated to its lowest level in two weeks.

Tata Motors Ltd.. dropped the most in two weeks after the automaker reported sales in December fell 42 percent, sending the S&P BSE India Auto Index to its biggest weekly decline in two months. Larsen & Toubro Ltd. and Bharat Heavy Electricals Ltd. slid at least 2 percent, driving down an index of capital goods companies to a one-month low.

The S&P BSE Sensex retreated 0.2 percent to 20,851.33, the lowest close since Dec. 19. The 30-stock gauge lost 1.6 percent this past week, the most in two months. A measure of manufacturing fell in December, a report showed yesterday, prompting concerns that the pace of economic expansion will slow. Borrowing costs will stay high as long as inflation remains elevated, a deputy governor of the Reserve Bank of India said yesterday.

“There has been no substantial healing of the macro-economic concerns,” Dipen Sheth, head of institutional research at HDFC Securities Ltd., said by phone today. “Car sales have cracked, and manufacturing is not out of the woods.”

Tata Motors, owner of Jaguar & Land Rover, slumped 2.6 percent, the most since Dec. 12. Tractor producer Mahindra & Mahindra Ltd. tumbled 3.8 percent, the biggest decline in four months. Hero MotoCorp Ltd. and commercial vehicle manufacturer Ashok Leyland Ltd. also said monthly sales fell. The S&P BSE India Auto Index dropped 1.2 percent.

TCS, Infosys Climb

Larsen & Toubro fell to a one-month low and Tata Power Co. declined 3.8 percent. Bharat Heavy dropped 2.5 percent to a two-week low. The S&P BSE India Capital Goods Index declined 1.7 percent. NTPC Ltd. decreased 2.2 percent while Coal India Ltd. retreated 1.9 percent.

Tata Consultancy Services Ltd., the country’s largest software exporter, rose 2.6 percent. The stock rallied 73 percent last year for the biggest gain among Sensex stocks. Rival Infosys Ltd. advanced 2.4 percent.

HSBC Holdings Plc and Markit Economics’s Purchasing Managers’ Index for manufacturing in December fell to 50.7 from 51.3 in November. A reading of more than 50 signals expansion. Gains in India’s consumer prices quickened to 11.24 percent in November compared with 3 percent in China and 2.9 percent in Malaysia, official data show.

“If you are having continuously high inflation, it will kill your growth,” RBI Deputy Governor K.C. Chakrabarty told Bloomberg TV India. “If interest rates are high, that’s because inflation is high, and unless inflation is brought down, interest rates will not come down.”

Central bank Governor Raghuram Rajan last month surprised economists by holding the benchmark rate at 7.75 percent instead of adding to increases totaling 50 basis points since taking office in September. The authority meets for its next policy review on Jan. 28.

The Sensex is valued at 13.3 times projected 12-month earnings, compared with the five-year average of 14.4 times, according to data compiled by Bloomberg. The MSCI Emerging Markets Index is trading at 10.3 times.

The 50-stocks CNX Nifty Index lost 0.2 percent, taking the past week’s decline to 1.6 percent.

To contact the reporter on this story: Santanu Chakraborty in Mumbai at schakrabor11@bloomberg.net

To contact the editor responsible for this story: Michael Patterson at mpatterson10@bloomberg.net

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