Lenders Lead Declines in India Stocks Before Rajan Reviews Rates

  • Economists expect central bank to hold borrowing costs Tuesday
  • ICICI Bank, SBI pace Sensex retreat; Maruti falls on sales

Indian stocks dropped, led by lenders, in a volatile trading session that saw the benchmark index change direction at least 15 times before the central bank prepared to review interest rates.

ICICI Bank Ltd., the country’s biggest private lender, plunged the most in five months. State Bank of India, the biggest lender, dropped to its lowest level in almost two years. Maruti Suzuki India Ltd., the maker of half the cars sold in India, slid the most in a week after sales fell in January. Larsen & Toubro Ltd., the largest engineering company, climbed after saying it doesn’t expect a slowdown in orders in the year through March.

The Sensex fell 0.2 percent to 24,824.83 at the close in Mumbai. The gauge capped its first weekly gain in four on Friday as the Bank of Japan’s negative interest-rate strategy added to confidence that major central banks remain supportive of growth. Reserve Bank of India Governor Raghuram Rajan is expected to leave interest rates unchanged at a five-year low on Tuesday after four reductions in 2015.

“At this point everybody is unclear which way the markets are going globally,” Prashasta Seth, chief executive officer at India Infoline Asset Management Co., which has $620 million in assets, said in an interview to Bloomberg TV India. “It’s very unlikely that the RBI would do anything given the choppiness all around. We expect a status quo. What we would look for is their commentary on inflation and their prognosis on the economy.”

Rate Expectations

Thirty-eight of 40 economists in a Bloomberg survey predict Rajan will leave the benchmark repurchase rate at 6.75 percent, while two see a cut to 6.5 percent. Twenty-seven of 28 economists in a separate Bloomberg survey also predict he will keep banks’ cash reserve ratio at 4 percent on Tuesday, compared with a call for a 50-basis point cut from Goldman Sachs Group Inc. economist Tushar Poddar.

Banks in India are grappling with rising bad loans amid the highest stressed-debt ratio in at least 14 years. The central bank has set a March 2017 deadline to help bolster balance sheets by increasing provisions.

ICICI Bank tumbled 5.6 percent, the most since Aug. 24, after reporting last week the slowest quarterly profit growth in six years as bad loans surged. State Bank fell 4 percent to its lowest level since March 2014. Axis Bank Ltd. lost 2.2 percent.

Maruti Sales

Maruti slid 3.6 percent, extending this year’s loss to 15 percent. The stock was the best performer last year on the Sensex with a 39 percent rally. Its January sales fell 2.6 percent.  

Larsen & Toubro gained 1.9 percent. The company said after market hours Friday it expects orders to grow 10 percent to 15 percent in the next financial year. In the September quarter, the company had scaled down its annual guidance to a 5 percent to 7 percent growth. Its third-quarter profit of 10.3 billion rupees matched analyst estimates.

Eight of the 15 Sensex firms that have reported December-quarter results so far have beaten or matched estimates, versus 57 percent in the three months ended September and 60 percent in June, data compiled by Bloomberg show.

SpiceJet Ltd. surged 3.1 percent after aviation fuel prices were cut 13 percent. Jet Airways India Ltd. gained 0.6 percent. InterGlobe Aviation Ltd., which runs the biggest carrier Indigo, rose 0.8 percent.

The Sensex fell 4.8 percent in January, its worst start to the year since 2011, after foreigners sold $1.8 billion of local stocks last month through Thursday.

(An earlier version of this stocks wrap was corrected to say there were four interest-rate reductions in 2015.)

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