India’s Sensex Drops for a Second Day Led by Banks, Industrials

Indian stocks retreated for a second day, led by industrial and consumer companies, amid speculation a rally in crude oil to a five-week high will stoke inflation.

ITC Ltd. slid 2 percent, sending a gauge of consumer goods companies to a two-week low. Larsen & Toubro Ltd. dropped the most in two weeks. Hindalco Industries Ltd., the second-largest aluminum maker, was the worst performer on the benchmark index. Unitech Ltd. plunged 9.3 percent after CNBC-Awaaz television channel reported Life Insurance Corp. of India is likely to declare the developer a defaulter.

The S&P BSE Sensex slid 0.7 percent to 20,708.71 at the close. Higher oil increases import costs for a nation that buys about 80 percent of its oil from abroad. Reserve Bank of India Governor Raghuram Rajan has raised the main interest rate twice after he moved to the central bank in September to fight rising prices. India’s local elections for five states that were held in phases ended today.

“The spike in oil spurred fresh inflationary concerns,” Vaibhav Sanghavi, a director at Ambit Investment Advisors Pvt. in Mumbai, said by phone today. “Investors are also awaiting cues from state election results for direction.”

West Texas Intermediate crude rose as much as 1.4 percent to $97.39 per barrel, the highest level since Oct. 30, as U.S. inventories shrank. Rajan may raise the repurchase rate to 8.5 percent next year from 7.75 percent, Goldman Sachs Group Inc. said on Nov. 21. The RBI’s next policy meeting is on Dec. 18.

Voting began today in New Delhi, the last of the five states to go to polls that are considered a test for opposition leader Narendra Modi, as his Bharatiya Janata Part seeks to build support before nationwide general elections next year. The results of the monthlong state elections are due on Dec. 8.

Unitech, HPCL

ITC, which has the highest weighting in the Sensex, fell the most since Nov 21. Hindustan Unilever Ltd. dropped for a third day. The S&P BSE FMCG Index retreated 1.4 percent.

Larsen & Toubro retreated 1.5 percent, the most since Nov. 21 and a second day of declines. Unitech slumped the most since Aug. 16. Hindustan Petroleum Corp., the nation’s second-largest state refiner, slid 1.5 percent.

ICICI Bank Ltd. lost 1.8 percent, sending a measure of lenders to its biggest decline in a week. The stock was the second-worst performer on the Sensex. Federal Bank Ltd. lost 1.3 percent. The S&P BSE India Bankex fell 0.6 percent.

The Sensex has climbed 6.6 percent this year, the best performer among the four largest emerging markets, and trades at 13.5 times projected 12-month earnings, compared with the MSCI Emerging Markets Index’s 10.5 times.

Overseas investors have purchased a net $17.59 billion of Indian equities this year, the most in Asia after Japan, data compiled by Bloomberg show. They bought a net $1.1 billion of stocks in November, the third monthly inflow, the data show.

The CNX Nifty Index on the National Stock Exchange of India Ltd. fell 0.7 percent to 6,160.95. The India VIX, which gauges the cost of protection against losses in the Nifty, tumbled 4 percent, the most since Nov. 22.