Sensex Drops Most in Two Weeks on Indian Rail Freight Increase

Indian stocks dropped the most in two weeks as metals and cement producers retreated after the government raised freight costs in its annual railway budget.

Hindalco Industries Ltd. and Steel Authority of India Ltd. fell at least 2.5 percent, sending a gauge of metalmakers to a two-week low. UltraTech Cement Ltd. decreased the most in seven weeks. Kalindee Rail Nirman (Engineers) Ltd. fell 4.4 percent.

The S&P BSE Sensex lost 0.9 percent to 28,746.65, the most since Feb. 9. Railway Minister Suresh Prabhu raised tariffs on cement, coal and foodgrains by as much as 10 percent to collect 40 billion rupees ($649 million) a year, but spared passengers from an increase in fares. The winding up of positions on the final day of trading in February derivatives contributed to the declines.

“Structurally, it is a good budget, but the markets are not looking at a three-to-four year timeframe, and the expiry is around the corner,” Mayuresh Joshi, head of institutional sales at Angel Broking Ltd. in Mumbai, told Bloomberg TV India today. “People were expecting lot of railway projects to be announced. The hike in freight proved to be a dampener.”

Hindalco slid 2.5 percent. Steel Authority tumbled 3.4 percent and Tata Steel Ltd. fell 1.6 percent in a fifth day of losses. Sesa Sterlite Ltd. lost 1.2 percent, dragging down the S&P BSE India Metal Index to its lowest level since Feb. 12.

UltraTech Cement, ACC Ltd. and Grasim Industries Ltd., the nation’s largest cement makers, fell by as much as 2.2 percent.

Bharat Heavy Electricals Ltd., the biggest power-equipment maker, plunged 3.6 percent.

Companies catering to the railways declined even as the minister proposed a review of the wagon-making program to make it attractive for private companies.

Railroad Stocks

Kalindee Rail retreated 4.4 percent to its lowest price since Jan. 21, taking the week’s loss to 16 percent. The stock rallied 12 percent in the four weeks through Feb. 22.

Titagarh Wagons Ltd. added 0.4 percent after falling as much as 7.5 percent earlier.

Traders replaced higher-than-average February CNX Nifty Index futures with the next month’s series at the expiry.

The rollover rate jumped to 77 percent as of 3:42 p.m. in Mumbai as investors swapped current-month futures with March contracts. That compares with a six-month closing average of 71 percent on expiry, according to data compiled by Bloomberg.

The Sensex has risen 4.5 percent this year amid optimism Prime Minister Narendra Modi’s first full-year budget on Saturday, Feb. 28 will announce steps to improve infrastructure, boost local manufacturing and reduce food subsidies. The gauge trades at 16.2 times projected 12-month profits, a 13 percent premium to the five-year average.

Global investors bought a net $170.5 million of domestic shares on Feb. 24, taking this year’s inflows to $3.4 billion, the second-highest among eight Asian markets tracked by Bloomberg, after Taiwan.

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