India’s Sensex Has Biggest Weekly Drop in 15 Months on Politics

Indian stocks fell for the sixth day, with the benchmark index completing its worst weekly loss in 15 months, on concern political instability and limited room to cut interest rates will undermine efforts to revive growth.

The S&P BSE Sensex retreated 0.3 percent to 18,735.60 at the close in Mumbai, its lowest level since Nov. 26. The index tumbled 3.6 percent this week, the worst weekly drop since the period ended Dec. 16, 2011, and its 30-day volatility climbed to a five-month high. Bharti Airtel Ltd., the nation’s largest mobile-phone operator, decreased 1.3 percent. State Bank of India, the largest lender by assets, lost 1.7 percent.

The lower house of parliament was adjourned after it failed to transact any business for the third day amid uproar over alleged war crimes in Sri Lanka, prompting concern the government’s efforts to revive growth may be derailed. India’s central bank March 19 pared funding costs for the second time this year and said the scope for further cuts is limited.

“The mood and the environment at this point of time is extremely despondent and I don’t think we’re set up for any constructive bullish action,” Sanjay Dutt, a director at New Delhi-based Quantum Securities Ltd., told Bloomberg India TV. “Given the relatively hawkish statement by the Reserve Bank and the political uncertainty, the best case situation is that we consolidate at this level until the macro data and the political environment start to clear out.”

Bharti slid 1.3 percent to 294.05 rupees. State Bank of India lost 1.7 percent to 2,083.95 rupees. Tata Steel Ltd., the largest producer of the alloy, decreased 1.8 percent to 321.85 rupees. Tata Motors Ltd., the owner of Jaguar Land Rover, lost 1.2 percent to 270.35 rupees.

War Crimes

The Dravida Munnetra Kazhagam party withdrew from Prime Minister Manmohan Singh’s alliance on March 19, alleging his administration had worked with the Sri Lankan government to “water down” a United Nations Human Rights Council resolution on alleged wartime atrocities in the island nation. The exit left Singh’s grouping 44 seats short of parliamentary majority, adding to the challenge of implementing policies.

The DMK is based in the southern state of Tamil Nadu, which shares cultural and religious ties with Sri Lankan Tamils.

Foreigners still bought $76 million of domestic stocks on March 21, extending this year’s purchases to $9.9 billion, data from the regulator show. Net inflows last year totaled $24.5 billion, the most among 10 Asian markets tracked by Bloomberg.

“The market has managed to hold on and not collapse only because of overseas flows and the risk-on trade that has been on for a while,” Quantum’s Dutt said. “If inflows start to taper or vanish, we’re in for bad times.”

Volatile Session

The Sensex changed direction more than 30 times, with its 30-day volatility rising to the highest since Oct. 29. The S&P BSE Mid-Cap index slid to a six-month low, while the S&P BSE Small-Cap gauge closed at its lowest level in more than a year.

The 50-stock CNX Nifty Index lost 0.1 percent to 5,651.35. India VIX, which measures the cost of protection against losses in the Nifty, tumbled 5.9 percent to 15.54.

“The Sensex and the Nifty comprise the biggest companies and don’t reflect the nervousness seen in the broader market, which has been massacred,” said Jagannadham Thunuguntla, chief strategist at SMC Global Securities Ltd. in New Delhi.

The Sensex has lost 3.6 percent of its value this year, the second-worst performing benchmark index among emerging Asian nations. Stocks have slid amid the weakest economic growth in a decade, the highest inflation among major emerging markets and as more company earnings missed estimates in the three months ended Dec. 31 compared with the previous quarter.

The gauge trades at 12.7 times projected 12-month profits, compared with the MSCI Emerging Markets Index’s 10.4 times.

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