India’s Sensex Caps First Weekly Decline in Three on ECB Selloff

  • Rupee slides past 67/dollar first time since September 2013
  • Futures signal 74% probability of Fed rate increase this month

Indian stocks dropped for a third day and rupee weakened, tracking losses in global equities amid disappointment in the European Central Bank’s stimulus decision.

Mahindra & Mahindra Ltd., the largest tractor maker, was the worst performer on the S&P BSE Sensex. Housing Development Finance Corp., the biggest mortgage lender, posted the biggest drop in a month, while ICICI Bank Ltd. dropped for a fourth day this week. NTPC Ltd., the top power generator, retreated to a one-month low.

The Sensex slid 1 percent to 25,638.11 at the close in Mumbai, taking the weekly loss to 1.9 percent. Equity gauges in Japan, Australia and China dropped more than 1.2 percent after ECB President Mario Draghi delivered a smaller stimulus package than many had expected. Futures are indicating a 74 percent probability that the U.S. Federal Reserve will raise interest rates this month.

“We’re all central-bank gazing, so looking at the ECB, the Fed," Hugh Young, managing director for Asia at Aberdeen Asset Management Plc., which has $430 billion in assets, said in an interview to Bloomberg TV India. The rate increase by the Fed will be a “relief because we’ve been waiting for so long,” he said. Young said he’s bullish on software exporters, private lenders, consumer companies and drugmakers.

Draghi Selloff

More than $500 billion was erased from the value of global bonds and equities worldwide on Thursday amid disillusionment with the ECB’s decision, which involved a rate cut and an extension in stimulus. Even Federal Reserve Chair Janet Yellen said in an address to the U.S. Congress that “the market expected some actions that were not forthcoming.” She reaffirmed her support for an interest-rate increase as soon as this month, with the focus now shifting to Friday’s payrolls report.

The rupee fell past 67 per dollar for the first time since September 2013 before paring losses after state-run banks sold the greenback on behalf of the Reserve Bank of India, traders said. The currency weakened 0.2 percent to 66.7563 at 4:33 p.m. in Mumbai. It has declined 5.9 percent in 2015, on course for a fifth straight annual drop.

Mahindra & Mahindra dropped the most since Oct. 30. HDFC slid 2.4 percent, the most since Nov. 2, while ICICI Bank Ltd. capped its biggest four-day decline in almost a month. NTPC fell 2.3 percent to 130.4 rupees, the lowest price since Oct. 29.

Reliance Communications Ltd. tumbled from a 11-month high after the wireless operator announced a non-binding pact to sell its cellular towers across India to private-equity firms Tillman Global Holdings LLC and TPG Asia Inc. in a bid to pare its debt. The buyers will also consider purchasing the company’s optic fiber assets in a separate deal.

“Traders unwound their positions after the stock rallied on expectations of this announcement,” Abhimanyu Sofat, the Mumbai-based co-founder of AdviseSure Ventures Pvt., an investment advisory firm, said in a phone interview.

Global funds sold a net $80 million of Indian equities on Dec. 3, adding to the $1.1 billion of outflow from local stocks in November. The Sensex has fallen 6.8 percent this year and trades at 15.1 times projected 12-month earnings. The MSCI Emerging Markets Index is valued at a multiple of 11.2.

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