Indian Stocks Drop for Fifth Day as RBI Pares Growth ForecastSantanu Chakraborty and Rajhkumar K Shaaw
Indian stocks retreated, with the benchmark index posting its longest losing run in almost four months, after the central bank cut its growth forecast and kept interest rates unchanged.
Hindalco Industries Ltd., an aluminum maker, plunged to a four-year low, leading a gauge of metal companies to its lowest level since April 2009. Reliance Industries Ltd., owner of the world’s biggest refining complex, fell for the fifth day, the longest losing streak in two months. Motorcyle maker Bajaj Auto Ltd. decreased the most in more than four months.
The S&P BSE Sensex lost 1.3 percent to 19,348.34 at the close, set for a second monthly drop. The Reserve Bank of India cut its economic growth forecast for the year to March 2014 to 5.5 percent from 5.7 percent and maintained the benchmark rate at 7.25 percent. Steadying the rupee has become a priority, the RBI said in an economic review yesterday, after the currency fell to a record on July 8. The rupee slid 1.8 percent today.
“Given the slowdown, achieving the 5.5 percent forecast will be a stretch,” Shishir Bajpai, senior vice president at IIFL Wealth Management Ltd, said by phone today.
The Sensex slid 2 percent last week as the RBI raised two rates and tightened banks’ access to cash to steady the rupee, which touched an unprecedented low of 61.2125 per dollar on July 8. The measures will be unwound in a “calibrated manner” as the rupee stabilizes, the RBI said today.
“There’s no scope for the RBI to roll back the tightening measures in the immediate future given the way the currency is behaving,” Rajat Jain, who oversees 48.5 billion rupees ($806 million) in assets as chief investment officer at Principal PNB Asset Management Co. in Mumbai, said by telephone today.
Hindalco slumped 4.6 percent to 86.50 rupees, the lowest level close July 2009. Sterlite Industries India Ltd., India’s biggest copper producer, lost 1.7 percent to 72.7 rupees, the lowest price in more than four years. Tata Steel Ltd. tumbled 2.8 percent to 209.4 rupees, the lowest level since March 2009.
Reliance plunged 3.2 percent to 857.35 rupees, the lowest level since July 10. Bajaj Auto lost 3.5 percent to 1,925.80 rupees, the sharpest loss since March 21. Oil & Natural Gas Corp., the nation’s largest explorer, slumped 5.7 percent to 280.70 rupees, the steepest decline in more than a year.
State-owned refiners Indian Oil Corp., Bharat Petroleum Corp. and Hindustan Petroleum Corp. plummeted by at least 8 percent each on concern a weakening rupee will increase their import costs, according to Alex Mathews, head of research at Geojit BNP Paribas Financial Services Ltd. Indian Oil closed at the lowest price since March 2009 and Hindustan Petroleum at the lowest since October 2008. India relies on imported crude to meet 80 percent of its energy needs.
Foreigners have pulled $1.1 billion from local shares this month through July 29, the most among 10 Asian markets tracked by Bloomberg, extending June’s $1.8 billion sell-off. They have pared holdings of local debt by $8.9 billion since May 22, when the U.S. Federal Reserve signaled it may reduce stimulus. Fed policy makers begin a two-day meeting today.
“India is still hostage to what U.S. policy will be and the market will now have to watch outside events,” Andrew Holland, chief executive officer at Ambit Investment Advisors Pvt., said by e-mail.