Indian Stocks Extend Week’s Loss as Rupee Declines to 1-Year Low

India’s benchmark index fell for a second day, extending a weekly loss, as the rupee’s decline to a one-year low spurred concerns overseas funds will pare holdings of local shares.

The S&P BSE Sensex fell 0.5 percent to 19,429.23 in Mumbai. The gauge lost 1.7 percent this week. Trading volumes were 33 percent lower than the 30-day average. Reliance Industries Ltd., owner of the world’s largest refining complex, fell 1.1 percent. ICICI Bank Ltd., the biggest private lender, declined the most in more than a month.

India’s rupee weakened past 57 per dollar for the first time in almost a year on concern the U.S. Federal Reserve may scale back debt purchases that have fueled fund flows to emerging markets. Foreign funds bought a net $28 million of local stocks on June 5, according to data from the market regulator released yesterday, extending this year’s net purchases to $15.3 billion, a record for the period.

“We were expecting the markets to remain range-bound, but the currency has been the joker in the pack,” Kaushik Dani, a fund manager at Peerless Mutual Fund, which has about $870 million in assets, said by phone from Mumbai. “The rupee is spooking sentiment. A weak currency has an adverse impact on our macros, increases the current account deficit and puts pressure on flows.”

The rupee has fallen 1 percent this week, and was at 57.0725 per dollar as of 4:24 p.m. in Mumbai, according to data compiled by Bloomberg. The currency fell 0.4 percent today. It earlier touched 57.1250, the weakest level since June 28, 2012.

Oil Prices

The Sensex has jumped 6.6 percent from a seven-month low on April 9 as inflation eased and prices of oil, India’s biggest import, fell. The Standard & Poor’s GSCI gauge of 24 raw materials has fallen about 7.4 percent from this year’s high in February as slowing Chinese growth hurt demand for commodities.

“All the benefits of lower commodity prices is being negated by the rupee’s fall,” Peerless’s Dani said.

ICICI Bank dropped 1.1 percent to 1,141.7 rupees, the biggest decline since May 31. Reliance slid 1.1 percent to 783.60 rupees. HDFC Bank Ltd. slipped 0.9 percent to 676.15 rupees. Tractor maker Mahindra & Mahindra Ltd. slumped 2.5 percent to 966.35 rupees. Larsen & Toubro Ltd., the nation’s largest engineering company, lost 1.3 percent to 1,412.3 rupees.

Maruti Suzuki India Ltd., fell 2 percent to 1,554.9 rupees after the Japanese yen extended its biggest gain in three years. Import costs are equivalent to about 20 percent of the New Delhi-based carmaker’s sales. The company halted production at all plants today because of low demand for vehicles.

The Sensex has slumped 4.2 percent since climbing to its highest level in more than two years on May 17, erasing all of this year’s gains. The gauge is valued at 13.4 times projected 12-month profits, the cheapest since May 1. That compares with the MSCI Emerging Markets Index’s 10 times.

The 50-stock CNX Nifty index on the National Stock Exchange of India Ltd. fell 0.7 percent to 5,881. Its June futures settled at 5,898.85. India VIX, which gauges the cost of protection against losses in the Nifty, was unchanged.

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