India Stocks Drop Most in 2 Months With Rupee Amid Fed Rate Bets

Indian equities tumbled the most in two months and the rupee weakened after U.S. payroll data spurred speculation the Federal Reserve will raise interest rates, damping demand for emerging-market assets.

The S&P BSE Sensex slid 2.1 percent to 28,844.78 at the close in Mumbai, tracking losses in benchmark equity indexes across Asia. The currency touched a two-month low of 62.7325 a dollar, while the yield on sovereign notes due July 2024 rose three basis point to 7.74 percent.

Indian stocks capped their fourth weekly advance, with the Sensex briefly rising above the 30,000 mark for the first time on Wednesday after the central bank’s second interest-rate cut this year. Foreigners have poured about $11 billion into local stocks and bonds this year after an unprecedented $42 billion of net inflows in 2014, data compiled by Bloomberg show.

“Strong global liquidity has been a big driver of the market, and if the U.S. starts tightening India will get impacted,” Sanjeev Prasad, the co-head and senior executive director at Kotak Institutional Equities, said in an interview to Bloomberg TV India today from Singapore. “Cost of money has collapsed and people are looking at yields. India received a fair share of the inflows.”

The MSCI Asia Pacific Index dropped 0.8 percent, the most since Jan. 29, after data showed Friday that U.S. employers added 295,000 workers in February, pushing the unemployment rate to the lowest since 2008. Rising yields in the world’s biggest economy erode the attraction of emerging-market assets.

‘Triggers Exhausted’

The Sensex has climbed 4.9 percent since Jan. 1, extending last year’s 30 percent advance. The rally pushed up the gauge’s valuation to near the highest level since January 2011, data compiled by Bloomberg show.

“Profit-taking will build up steam in the coming weeks because we have exhausted all near-term triggers,” Sandeep Shenoy, an executive director for equities at Pioneer Invest Corp., said in an interview to Bloomberg TV India today. “Even the RBI cues are over.”

The rupee dropped 0.6 percent to 62.5450 at the close.

Tata Consultancy Services Ltd. dropped to a three-week low after saying March 5 that it expects fourth-quarter revenue to be in line with last year’s trend. Infosys Ltd. slid the most sine Feb. 26 after the Mint newspaper reported the software exporter may delay its March-quarter earnings.

Axis Bank Ltd. and ICICI Bank Ltd. tumbled 4 percent each, the biggest decliners on the S&P BSE Bankex. The gauge was the worst performer among the industry indexes.

Sesa Sterlite Ltd. and Hindalco Industries Ltd., India’s top copper producers, were the biggest losers on the Sensex. A gauge of metalmakers slid 2.4 percent.

Overseas investors bought a net $226.4 million of shares on March 5, taking this year’s inflows to $5.3 billion, the highest among eight Asian markets tracked by Bloomberg, after Taiwan. Indian markets were closed Friday for a public holiday.

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