India Nifty Futures Decline as RBI Signals No Stimulus

Indian stocks declined the most in about a month after the central bank said concerns about inflation has reduced the scope to ease monetary policy.

The BSE India Sensitive Index, or Sensex, fell 0.9 percent to 19,817.63 at the close, the most since Dec. 21. The measure surpassed the 20,000 level yesterday for the first time in two years. Tata Motors Ltd. slid the most in more than two months as sales of its Jaguar and Land Rover units missed forecasts. ICICI Bank Ltd., India’s third-biggest lender, had the steepest fall in two months, leading its peers lower.

The central bank’s limited scope for stimulus “is a big concern,” Reserve Bank of India Governor Duvvuri Subbarao said in a speech in Lucknow late yesterday. Moderation in inflation to 7.18 percent in December, the slowest in three years, was a “decline from a peak, but still quite high,” he said.

“The market has priced in a rate cut, which in itself will not be a meaningful game changer,” Aditya Narain, head of India research at Citigroup Inc., told Bloomberg TV India today. “Rate-cut expectations are getting exaggerated.”

The RBI will probably restrict its action at the Jan. 29 review to a 25 basis-point reduction in the repurchase rate to 7.75 percent, according to 13 of 16 analysts in a Bloomberg survey. The rest expect a reduction to 7.5 percent.

The central bank signaled last month that monetary policy must shift toward aiding economic growth, predicting inflation will moderate. The authority has kept its benchmark borrowing cost unchanged at 8 percent for five straight meetings. The finance ministry predicts the economy will expand as little as 5.7 percent in the year to March 31, the slowest in a decade.

Jaguar Sales

Tata Motors plunged 3.5 percent to 320.05 rupees, the most since Oct. 30. Infosys Ltd., India’s second-biggest software exporter, lost 0.7 percent to 2,767.45 rupees, a second day of losses. The stock soared 17 percent Jan. 13 after the company raised its full-year sales forecast and reported third-quarter profit that exceeded estimates.

ICICI Bank lost 2 percent to 1,179.85 rupees, the most since Nov. 16. State Bank of India, the biggest by assets, lost 2.3 percent to 2,432.4 rupees, the sharpest drop since Nov. 9. The country’s financial system has been made vulnerable by a deterioration in bank assets amid an economic slowdown, the International Monetary Fund said in statement today.

Bajaj Auto Ltd. lost 1.8 percent to 2,076.5 rupees. The nation’s second-biggest motorcycle maker reported today sales of 53.1 billion rupees for the December quarter, lower than 54.2 billion rupees median estimate in a Bloomberg survey.

Two out of three Sensex companies that announced earnings for the December quarter so far have beaten analysts estimates. Net incomes for 40 percent of the Sensex firms missed analysts’ estimates for the three months ended September, the same as for the June quarter, data compiled by Bloomberg show.

Foreign Investment

The Sensex last year had its biggest annual rally since 2009 as Prime Minister Manmohan Singh opened the economy to more foreign investments to revive growth and avert a rating downgrade. The steps help spur inflows into equities, with foreign funds buying a net $1.78 billion this year, almost three times the level at the same time in 2012. They plowed $24.5 billion last year, the most after Japan among 10 Asian markets tracked by Bloomberg, which excludes China.

The gauge trades at 15.7 times estimated earnings, the highest level since March, compared with the MSCI Emerging Markets Index’s 11 times. The S&P CNX Nifty Index declined 0.9 percent to 6,001.85. India VIX, which measures the cost of protection against losses in the Nifty, jumped 3 percent.

“Markets will consolidate around current levels as large caps have rallied a lot,” said A.K. Prabhakar, senior vice president for equity research at Anand Rathi Financial Services Ltd. in Mumbai, said by phone today.

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