- Sensex capped its fourth weekly gain on foreign fund inflows
- Monthly equity derivatives contracts expire on Thursday
Indian stocks dropped the most in a month as some investors pared bets on interest-rate sensitives like lenders and engineering companies before before the monetary policy next week and the end of the monthly derivatives series on Thursday.
State Bank of India slid the most in six weeks, while ICICI Bank Ltd., the largest private lender by assets, dropped the most in three weeks. Sun Pharmaceutical Industries Ltd., the nation’s most valuable drugmaker, declined the the most this year. Tata Steel Ltd. tumbled 5.2 percent, the worst performer on the benchmark gauge.
The S&P BSE Sensex declined 1.5 percent at the close, the steepest loss since Feb. 23, while a gauge of mid-cap stocks fell to a two-week low. The Sensex is set for its best month since October 2013, as Finance Minister Arun Jaitley’s pledge to further cut the fiscal gap stoked speculation of an interest-rate reduction and spurred capital inflows into local shares. The Reserve Bank of India is scheduled to review rates on April 5.
“Traders are booking profits on rate-sensitive sectors after a sharp rally rather than face the uncertainty of the rate decision next week,” Chakri Lokapriya, the Mumbai-based chief investment officer at TCG Advisory Services Pvt., which manages about $3 billion in assets worldwide, said by phone. “The market is showing bouts of weakness before the expiry this week.”
RBI Governor Raghuram Rajan has kept interest rates on hold since September and said last month that a prudent budget as well as contained inflation were pre-requisites for further easing. He also said that the economy showed signs of weaker momentum, “pulled down by slackening agricultural and industrial growth,” according to a Feb. 2 statement. He reduced benchmark borrowing costs by 125 basis points in 2015.
The outlook for lower interest rates and an easing in global market turmoil has brought foreign investors back to Indian equities. Global funds have bought $2.6 billion of shares this month, set for the biggest monthly purchase since January 2015. The inflows helped fuel an 8.5 percent advance in the Sensex this month, which left the gauge trading at its highest valuation this year.
Markets were closed Thursday and Friday for public holidays.
State Bank slid 4.2 percent to 188.30 rupees. ICICI Bank dropped 3.7 percent to 225.45 rupees. Sun Pharma tumbled 4.4 percent and Tata Steel slumped 5.7 percent. Housing Development Finance Corp., the largest mortgage lender, dropped for a second day.