Indian Stocks Fall to Two-Month Low on Growth, Stimulus Concern

Indian stocks fell to a two-month low as global equities extended a slump amid concern monetary authorities will reduce stimulus efforts. Automobile makers led the decline.

The S&P BSE Sensex retreated 1.1 percent to 18,827.16, its lowest close since April 17. Five stocks dropped for each that rose on the 30-stock gauge. Sun Pharmaceutical Industries Ltd. fell for a sixth day after it was asked to pay $550 million to Pfizer Inc. and a partner to settle a litigation. ITC Ltd., which has the highest weighting, dropped to a five-week low. Bajaj Auto Ltd. fell to a two-month low, lead its peers lower.

Asian stocks plunged, with the regional benchmark erasing this year’s gains, on speculation developed nations will scale back the liquidity they have been pumping, and after the World Bank cut its global growth forecast. The Sensex has dropped 4.7 percent this month on concern a weak rupee will stoke consumer prices, limiting the Reserve Bank of India’s scope to extend interest-rate cuts at its policy review on June 17.

“Stocks will be under pressure as long as global cues remain weak,” said R.K. Gupta, who helps oversee about $864 million as a New Delhi-based managing director at Taurus Asset Management Ltd. “Rupee depreciation has raised inflationary fears, which may curb the RBI from lowering interest rates.”

The rupee slumped to an all-time low earlier this week, weighed down by the current-account gap, and extended losses today, dropping as much as 1.3 percent. Consumer climbed rose 9.31 percent in May from a year ago, more than the 9 percent median estimate in a Bloomberg survey, official data showed yesterday. A report tomorrow may show wholesale price growth held at 4.9 percent in May, according to survey of 34 analysts.

Fitch Upgrade

Finance Minister Palaniappan Chidambaram today signaled more policy changes to revive growth and said steps are being taken to stabilize the currency, seeking to build on the boost to sentiment from Fitch Rating’s move yesterday to upgrade the nation’s outlook to stable from negative. The agency cited the government’s nine-month policy push to spur growth.

“We are concerned about the volatility and some steps are being taken to ensure there is no volatility” in the rupee, he told reporters in New Delhi. “But I don’t think there is any reason for panic.”

Sun Pharmaceutical tumbled 3.2 percent to 949.4 rupees, a sixth day of loss, the longest losing run since the eight-day period ended Jan. 21. The drugmaker settled a litigation with Pfizer over unauthorized sales of the heartburn drug Protonix. ITC lost 1.2 percent to 327 rupees.

Bajaj Auto slid 2 percent to 1,708.3 rupees. Carmaker Maruti Suzuki India Ltd. dropped 1.6 percent to 1,456.6 rupees, its lowest close since April 15. Tractor maker Mahindra & Mahindra Ltd. declined 2.5 percent to 923.85 rupees. Tata Motors Ltd., owner of the Jaguar and Land Rover, plunged 3.6 percent to 282.95 rupees, extending this year’s slide to 10 percent.

Foreigners Selling

Stocks in the Philippines, Thailand and Indonesia tumbled after foreign selling reached record levels.

The Philippine Stock Exchange Index dropped 6.8 percent, extending this month’s retreat to 13 percent. Thailand’s SET Index sank 3.8 percent, while Indonesia’s benchmark gauge lost 1.6 percent. Foreign funds pulled a net $2.7 billion from the three stocks markets this month through yesterday, the biggest eight-day outflow since Bloomberg began compiling the data in 1999.

Overseas investors sold $179 million of Indian equities on June 12, paring this year’s inflows to $15 billion, data from the regulator show. That’s still a record for the period, data compiled by Bloomberg show.

Shares of Apollo Tyres Ltd., the nation’s second-biggest tiremaker by value, sank 25 percent to 68.55 rupees, the most on record, after the company yesterday agreed to buy Cooper Tire & Rubber Co. for about $2.5 billion for greater access to the U.S. auto market. Apollo isn’t a Sensex member.

The Sensex trades at 12.9 times projected 12-month profits, the cheapest since April 24. That compares with the MSCI Emerging Markets Index’s 9.7 times.

The 50-stock CNX Nifty index on the National Stock Exchange of India declined 1.1 percent to 5,699.10. Its June futures settled at 5,705.45. India VIX rose 3.1 percent.

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