Indian stocks dropped to a two-week low, led by lenders and drugmakers, before the monthly derivatives contracts lapse on Thursday.
Housing Development Finance Corp., the biggest mortgage lender, fell to its lowest level since January. State Bank of India and ICICI Bank Ltd. pulled down an industry gauge for a second time this week. Mahindra & Mahindra Ltd., the largest tractor maker, slid to a two-month low, and Oil & Natural Gas Corp. slumped to a six-year low. Sun Pharmaceutical Ltd., the nation’s most valuable drugmaker, declined for a third day.
The S&P BSE Sensex tumbled 1.2 percent to 25,714.66 at the close, after changing directions eight times. Emerging-market stocks fell as China’s interest-rate cut failed to stop a $5 trillion rout in the Asian shares. Foreign funds sold a net $1.68 billion of Indian shares in August, set for the biggest monthly outflow since June 2013, amid the global selloff.
“China is causing people to pull back from equity markets in general and emerging markets in particular,” Hugh Young, managing director for Asia at Aberdeen Asset Management Plc, which overseas $482 billion, said in an interview to Bloomberg TV India. “India has been hit by a wave of redemptions.”
The withdrawals have put the Sensex on pace for its worst monthly performance since November 2011. Investors, including Reliance Capital Asset Management Ltd. and Birla Sunlife Asset Management Co., say the slump is an opportunity to buy shares as company earnings are expected to rebound because of falling commodity prices.
The 58 percent drop in Brent crude in the past year has helped curb India’s current-account deficit and consumer-price gains, improving the outlook for Asia’s third-largest economy. Moody’s Investors Service said Tuesday policies to curb price pressures and cut red tape could help the nation win a debt rating upgrade.
“Our macros have never been better,” Sunil Singhania, the head of equity investments at Reliance Capital, which has $22 billion in assets, said in an e-mail. “Oil’s at $43 and falling, our current and fiscal deficits are trending lower, the subsidy burden is falling and inflation is at multi-year lows in a falling interest-rate environment.”
Housing Development Finance plunged 3.8 percent, the most on the Sensex. State Bank lost 3 percent, while ICICI slid 1.9 percent. Mahindra & Mahindra dropped 2.8 percent to its lowest level since June 12.
Oil & Natural Gas retreated 2.5 percent to its lowest level since May 2009. Sun Pharmaceutical decreased 2 percent.
The Sensex has dropped 6.5 percent this year and trades at 14.5 times projected 12-month profits, the cheapest since June. The gauge rose 30 percent in 2014 after Prime Minister Narendra Modi’s Bharatiya Janata Party swept to power in May 2014.
About $8 trillion in market value has erased since China’s shock devaluation of the yuan on Aug. 11 as investors weighed prospects for slowing growth and the first interest-rate increase in the U.S. in almost a decade.
“It’s very hard to predict when this round of jitters will cease,” Aberdeen’s Young said. “When things stabilize people will look at where the best prospects are and that’s where India scores.”