Indian Stocks Fall to 5-Week Low on Rupee Weakness, Fed Concerns

India’s benchmark stock index fell to the lowest level in five weeks amid concern the rupee’s drop to the weakest in a year may prompt overseas investors to reduce their holdings of local shares.

The S&P BSE Sensex slid 0.3 percent at 19,519.49 at close in Mumbai, the lowest since April 30. Volume on the gauge was 22 percent lower than the 30-day average and its 50-day volatility stayed near the highest level in 11 months. Infosys Ltd., the nation’s second-biggest software exporter, headed for a one-week low. Reliance Industries Ltd., the owner of the world’s largest refining complex, fell 1.3 percent.

India’s rupee fell to 57 per dollar for the first time in a year on concern U.S. policy makers will curb asset purchases that boosted flows to emerging markets. The Sensex has declined 2.7 percent since May 22 when Fed Chairman Ben S. Bernanke said the Federal Reserve may curb stimulus efforts that fueled flows to emerging markets. A weak rupee threatens to stoke inflation that caps the Reserve Bank of India’s scope to extend monetary easing and counter the slowest economic growth in a decade.

“When you know the rupee is going to weaken further, it dissuades a lot of long-only investors,” Harendra Kumar, managing director of institutional equity at Elara Securities (India) Pvt Ltd., told Bloomberg TV India today. “That pushes back our recovery by four-to-five months and that is what is going to keep the market on tenterhooks.”

Reliance fell 1.3 percent to 792 rupees. Infosys fell 1.3 percent to 2,429.65 rupees, the lowest close since May 31. HDFC Bank Ltd., the second-biggest private lender, lost 0.8 percent to 682.2 rupees.

Bharti Airtel Ltd., India’s top mobile services company, fell 2.4 percent to 295.1 rupees, the lowest since April 17. Drugmaker Sun Pharmaceutical Industries Ltd. declined 1.8 percent to 1,018.1 rupees.

Sell Dollars

The rupee weakened 0.2 percent to 56.8250 per dollar, at 3:58 p.m. The RBI may sell dollars to slow the rupee’s slide as the currency approaches an all-time low of 57.3275 reached on June 22, 2012, said Vikas Babu, a trader at Andhra Bank in Mumbai.

Overseas investors bought $46.8 million rupees of local stocks June 4, data from the regulator showed yesterday, taking this year’s inflows to $15.2 billion, a record for the period.

The Sensex trades 13.5 times projected 12-month profits, compared with the MSCI Emerging Markets Index’s 10.1 times. Volumes on the Indian gauge were 27 percent below the 30-day average for this time of day.

The 50-stock CNX Nifty Index on the National Stock Exchange of India Ltd. fell less than 0.1 percent to 5,921.40. Its June futures settled at 5,933.50. India VIX, which gauges the cost of protection against losses in the Nifty, rose 3.4 percent.

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