Indian stocks declined, with the benchmark index entering a correction, and the rupee sank to its weakest level since 2013 as foreigners pared holdings in the nation’s assets amid a global selloff and rising oil prices.
The S&P BSE Sensex retreated 0.4 percent to 26,599.11, the lowest close in six months. The rupee touched 64.28 per dollar, the weakest since September 2013. The yield on 10-year sovereign bonds rose to a five-month high as a 23 percent rally in Brent since end-March sparked concern about inflation and the scope for interest-rate cuts.
The Sensex lost 2.6 percent on Wednesday as global funds extended the longest selloff in Indian shares this year amid concerns about profit growth. The gauge has fallen 10 percent from its Jan. 29 record, meeting the definition of correction, amid growing concern about the government’s ability to push through reforms. The Sensex is the only one down this year in the BRIC group after rallies in Brazil, Russia and China.
“The earnings season has been lackluster, economic data hasn’t picked up as expected and rising oil prices don’t help India,” Adrian Mowat, the chief Asian and emerging-market equity strategist at JPMorgan Chase & Co. in Hong Kong, told Bloomberg TV India. “Investors are reducing their overweight position in India and buying into other emerging markets.”
Overseas funds sold a net $279 million of shares on May 6, paring 2015’s purchases to $7 billion. They have been sellers every day since April 22. Funds sold $413 million of bonds. Net inflows into local stocks and bonds was a record $42 billion in 2014 after Prime Minister Narendra Modi’s landslide victory in May, data compiled by Bloomberg show.
While the Sensex has slid 3.3 percent this year, China’s Shanghai Stock Exchange Composite index has jumped 27 percent, Russia’s Micex index is up 21 percent and the Ibovespa Brasil Sao Paulo Stock Exchange index has climbed 14 percent.
“Investors were overweight India, waiting for wonderful things to happen,” Anil Ahuja, the Singapore-based chief executive officer of IPEplus Advisors, said in an interview with Bloomberg TV India on May 7. “Those things may or may not have happened but they are not showing up in company earnings.”
While seven of the 12 Sensex companies that have announced results for the March quarter have beaten or matched estimates, net incomes for the gauge will decline for a second straight quarter, forecasts compiled by Bloomberg show.
The rupee weakened 1.1 percent to 64.24. The currency’s breach past 64 reduces chances of a rate cut at the June 2 central bank meeting, according to Bank of America Merrill Lynch. The Reserve Bank of India has lowered rates twice in 2015 as a 49 percent plunge in oil in the 12 months through March helped cool consumer prices and cut the current-account deficit for Asia’s third-largest economy.
The retreat in global bonds and equities has wiped more than $2 trillion from markets worldwide in less than two weeks amid signs of price stabilization in Europe, speculation over U.S. interest rates and concern about slowdown in China. Federal Reserve Chair Janet Yellen said Wednesday that she sees potential danger in the rich valuations of both debt and stocks.
The yield on the 8.4 percent Indian government notes due July 2024 climbed 10 basis points, or 0.10 percentage point, to 7.993 percent, the highest close since Dec. 1.
The Sensex trades at 14.7 times projected 12-month profits, the cheapest since December. The MSCI Emerging Markets Index is valued at a multiple of 12.4.