Indian Stocks Drop to One-Month Low as May Factory Output Falls

Indian stocks declined to the lowest level in a month, led by automakers, after factory production in May fell to the lowest level in 50 months.

The S&P BSE Sensex lost 0.8 percent to 19,610.48 at close in Mumbai after tumbling the most in 14 months May 31. Volume on the measure was 20 percent below the 30-day average. Maruti Suzuki India Ltd. sank 2.3 percent after reporting sales in May slid 14 percent from a year ago. Sun Pharmaceutical Industries Ltd., India’s biggest drugmaker by value, lost 2.5 percent.

The manufacturing purchasing managers’ index for May from HSBC Holdings Plc and Markit Economics fell to 50.1, the lowest reading since March 2009. The April reading was 51, above the level of 50 that signals growth. A government report on May 31 showed Asia’s third-biggest economy grew a decade-low 5 percent in the year ended March. Manufacturing makes up 16 percent of gross domestic product, according to government data.

“The GDP and output data is sparking fears that recovery is not taking wing,” A.K. Prabhakar, senior vice president of equity research at Mumbai-based Anand Rathi Financial Services Ltd., said by phone from Mumbai. “Weak local as well as global macros may crimp further overseas fund flows into India.”

Foreigners sold $88 million of local stocks May 31, ending four days of net purchases, and contributing to the 2.3 percent tumble in the Sensex that day. Overseas funds have still bought a net $15.1 billion of Indian shares in 2013 as easing by global central banks stoked demand for higher yielding assets.

Autos Fall

Maruti declined 2.3 percent to 1,568.55 rupees, the lowest price since April 23. Bajaj Auto Ltd. tumbled 3.4 percent to 1,759.50 rupees, the most in two months. Motorcycle maker Hero MotoCorp Ltd. sank 3.8 percent to 1,670.5 rupees, the sharpest loss in more than a year and the worst performer on the Sensex today. Sun Pharmaceuticals lost 2.5 percent to 1,017.7 rupees after closing at a record on May 30.

Infosys Ltd. jumped 4.3 percent to 2,514.10 rupees, the most since Jan. 11, after the software maker asked co-founder N.R. Narayana Murthy to return as chairman to spur growth that analysts project at half the pace compared with bigger rival Tata Consultancy Services Ltd.

The MSCI Emerging Markets Index fell 0.9 percent to 999.75 as of 3:41 p.m. in Mumbai, after a 2.9 percent slump in May, as investors speculated the Federal Reserve will pare stimulus. Concerns about the U.S. authority tapering asset purchases that have spurred fund flows into emerging markets, including India, pushed down the rupee to an 11-month low today.

‘Rupee Concern’

The currency weakened 0.5 percent to 56.7650 at the close. It earlier touched 56.8250, the weakest level since June 28, 2012. A weaker currency worsens inflation and makes imports costlier for a nation whose current-account gap is at a record.

“Some uncertainty you are viewing in the market might be reflective of the” rupee’s move over 56, Sunil Singhania, head of equities at Reliance Capital Asset Management Ltd., said in an interview to Bloomberg TV today. “The rupee has not depreciated to that extent against other currencies, but still anything above 56 definitely causes a bit of concern.”

The Sensex has risen 1 percent this year and is valued at 13.5 times projected 12-month profits, higher than the MSCI Emerging Markets Index’s 10.2 times.

The CNX Nifty Index on the National Stock Exchange of India lost 0.8 percent to 5,939.30. Its June futures settled at 5,959.20. India VIX gained 1.8 percent to 17.29.

Before it's here, it's on the Bloomberg Terminal.