India’s ADRs Decline After S&P Sparks Downgrade ConcernRajhkumar K Shaaw, Ameya Karve and Ye Xie
India’s stocks sank to a 13-month low in New York and the rupee led losses among emerging-market currencies as oil climbed and Standard & Poor’s reiterated its view that the nation’s credit rating may be cut to junk.
The Bank of New York Mellon India ADR Index slid 2.3 percent to 890.25 yesterday, the lowest level since August 2012. American depositary receipts of ICICI Bank Ltd., the nation’s biggest private lender, fell 2 percent. ADRs of Infosys Ltd., a software services company, sank to the lowest since July 11. The S&P BSE Sensex slumped 3.5 percent to 18,234.66 in Mumbai, while the rupee sank 2.6 percent to lead losses among 22 of the 24 developing-nation currencies tracked by Bloomberg.
Stocks plunged and the the rupee extended losses yesterday as S&P said there is more than a one-in-three chance India’s rating will be cut within two years, and the possibility of a downgrade is higher than for Indonesia. Oil jumped as Israel said it carried out a missile joint test launch with the U.S. in the Mediterranean Sea, while U.S. House Speaker John Boehner said he will support President Barack Obama’s call for action on Syria. India imports about 80 percent of its oil.
“We are in the midst of all problems, Michael Shaoul, the chairman of New York-based Marketfield Asset Management, said in a phone interview from New York yesterday. The $13 billion MainStay Marketfield Fund has outperformed 97 percent of peers tracked by Bloomberg in the past five years and is betting against Indian shares. ‘‘Clearly, the rupee wants to go lower. You have the central bank need to defend the currency at the expense of the economy. There’s no incentive for foreigners to keep their money there.’’
S&P maintained its negative outlook on India’s BBB- rating, the lowest investment grade, credit analyst Kim Eng Tan said at a briefing in Seoul yesterday. Foreign funds pulled a net $2.3 billion from Indian bonds and stocks last month, exchange data show, amid speculation the U.S. will trim monetary stimulus.
Oil futures jumped yesterday after Israel said it carried out a joint missile test with the U.S. in the Mediterranean Sea, raising regional tensions already heightened by the Syria crisis and sending international markets tumbling. Boehner said use of chemical weapons in Syria requires a response and only the U.S. has the capability to ‘‘warn others around the world that this type of behavior is not going to be tolerated.’’
The rupee slid to 67.7300 per dollar in Mumbai yesterday, the biggest drop among 19 Asia-Pacific currencies, according to prices from local banks compiled by Bloomberg. It plunged 8.1 percent last month, the worst loss since March 1992, and touched an unprecedented 68.8450 on Aug. 28. The currency fell to a record low of 68.8450 per dollar last week as fund outflows from the local financial market left the currency vulnerable to an unprecedented current-account deficit.
‘‘With the rupee depreciating again due to the S&P threat, things are looking bad,’’ Deven Choksey, managing director at K.R. Choksey Shares & Securities, told Bloomberg TV India. ‘‘The missile launch is bad news as it has a huge impact on oil. Given our dependence on imported oil, the development may weaken the rupee further.’’
The Sensex has dropped 6.1 percent in local currency terms this year and 24 percent in dollar terms. The Bank of New York Mellon India ADR Index extended this year’s plunge to 15 percent. ICICI slid to $25.49 in New York, while HDFC Bank Ltd., the nation’s biggest lender by market value, sank 4.8 percent to $27.59. ADRs of Infosys fell 2 percent to $45.45.
The 13-member S&P BSE Bankex has dropped 31 percent this year on concern the economic slowdown and measures taken by the central bank last month to tighten cash supply will reduce earnings at lenders.
‘‘I get a feeling that something bad is coming in the banking sector due to high interest rates and hugh corporate debt,” Andrew Holland, chief executive officer at Ambit Investment Advisors Pvt. in Mumbai, said by e-mail. “We are riding our shorts on banks, property developers and companies with high debt.”
The CNX Nifty on the National Stock Exchange tumbled 3.8 percent to 5,341.45. India VIX, which measures the cost of protection against losses in the Nifty, surged 18 percent to the highest level since October 2011.