Indian Stocks Drop With Rupee as Wholesale Inflation Accelerates

India’s benchmark stock index fell to its lowest level in a week and the rupee extended losses after data showed wholesale-price inflation quickened at the fastest pace in five months.

Axis Bank Ltd. declined 2.5 percent, sending a gauge of 12 lenders to the lowest level in two weeks. Mahindra & Mahindra Ltd. was the worst performer on the measure of 10 automakers. Larsen & Toubro Ltd. had its biggest two-day drop in more than a month. The currency touched the lowest level since May 6. The yield on the 8.83 percent government bonds due 2023 climbed five basis points to a two-week high of 8.65 percent.

The S&P BSE Sensex lost 0.2 percent to 25,190.48 at the close. Wholesale prices climbed 6.01 percent in May, quickest since December, official figures showed today. The data comes amid a rally in oil prices and forecast for weaker rains that threaten to undermine Prime Minister Narendra Modi’s efforts to curb inflation and boost economic growth.

“The inflation data is disappointing,” Aneesh Srivastava, chief investment officer with IDBI Federal Life Insurance Co., said by phone from Mumbai. “We don’t expect it to come down soon, given rising oil prices and forecast for weak monsoon.”

Axis Bank fell for a third day, losing 8.6 percent in the period, the most in seven months. Larsen dropped 2.1 percent to 1,650.5 rupees. Mahindra declined the most in two weeks.

The rupee, which slid as much as 0.8 percent to 60.2250 a dollar, pared losses to close at 60.1650 as a central bank adviser said the currency will withstand the impact of higher energy prices and is unlikely to weaken “much beyond” 60 per dollar.

‘Keenly Watched’

Oil traded in New York climbed for a fourth day and Brent crude rose on concern that mounting violence in Iraq threatens to disrupt supplies. Higher energy costs may add to price pressures in a country that imports about 80 percent of its oil, threatening the government’s plans to pare the fiscal deficit as it prepares to unveil its first budget next month.

“The budget will be keenly watched for the government’s policy reaction and the fiscal roadmap,” Srivastava said.

The Reserve Bank of India signaled this month it could ease monetary policy if inflation slows faster than anticipated.

The Sensex is valued at 15.5 times projected 12-month profits, near the most expensive level in three years, and compares with the MSCI Emerging Markets Index’s multiple of 11.

Foreigners have bought a net $9.7 billion of local shares this year, the most among eight Asian markets tracked by Bloomberg, on optimism the new government will boost efforts to revive economic growth.

Before it's here, it's on the Bloomberg Terminal.