Indian Stocks Drop for Third Day on Expiry as State Bank Falls

  • Railway Minister Prabhu says will focus on ongoing projects
  • Railroad stocks tumble as budget fails to cheer investors

Indian stocks declined for a third day in volatile trading as the increase in expenditure announced in the railway budget failed to cheer investors on the last day of the monthly derivatives contracts.

State Bank of India was the worst performer on the S&P BSE Sensex, while Tata Motors Ltd., owner of Jaguar Land Rover, slid for a third day. Titagarh Wagons Ltd. and Texmaco Rail & Engineering Ltd. plunged 9 percent each, while Kalindee Rail Nirman Engineers Ltd. extended this week’s loss to 16 percent.

The Sensex lost 0.5 percent after changing direction at least 12 times. Railway Minister Suresh Prabhu proposed increasing the outlay for the world’s fourth-largest network by 21 percent to 1.2 trillion rupees ($18 billion) and said he will focus on completing the ongoing projects rather than announcing new ones. The rail budget comes before Monday’s federal budget, which this year is also key to the path of monetary policy. Central bank Governor Raghuram Rajan last month kept interest rates unchanged, signaling he’d watch the budget before adding to the biggest interest-rate cuts in six years in 2015.

“The railways budget was a disappointment as there were no big, bold ideas only incremental steps," A. K. Prabhakar, head of research at IDBI Capital Capital Market Services Ltd., said in a phone interview. “The volatility we are seeing is due to the expiry."

The Nifty 50 Index slid 0.7 percent to 6,970.60. The cost of extending futures contracts tied to the gauge climbed to the highest level in six months in a sign of optimism before next week’s federal budget.

Rollover Cost

The roll cost rose to 62 basis points of the contract’s value at 5:24 p.m. in Mumbai, the highest since August, data compiled by Bloomberg show. Investors carried more than 68 percent of their February contracts to the next month, versus a three-month average of 71 percent on expiry.

Economists surveyed by Bloomberg expect Finance Minister Arun Jaitley to meet the government’s fiscal deficit target for the year ending March 31, while slightly pushing back next year’s goal to 3.6 percent of gross domestic product.

Prabhu said the target is to earn as much as 20 percent of revenue from non-tariff sources in five years. The plan to expand the basket of freight comes amid a slump in the price of commodities, such as coal, the railroad typically ferries.

State Bank tumbled 2.9 percent, extending this year’s decline to 32 percent. ICICI Bank Ltd., the country’s biggest private lender, slid 2.1 percent. Bank of Baroda declined 2.7 percent and Axis Bank Ltd. fell 2.2 percent.

Railroad Stocks

Tata Motors lost 2.6 percent to its lowest level since Feb. 11. Larsen & Toubro Ltd., the most valuable engineering company, slid for a fourth day. Maruti Suzuki India Ltd., the largest carmaker, declined 2.2 percent. GAIL India Ltd. plunged 2.8 percent.

Titagarh Wagons has lost 19 percent this month, poised for its worst month since July 2014. Texmaco Rail & Engineering tumbled the most since July 9, 2014. Kalindee Rail Nirman decreased 7.9 percent, the most since Jan. 18. BEML Ltd. slid 3.9 percent.

The Sensex has fallen 7.6 percent in February, set for the worst month since November 2011. Foreigners sold $76 million of local stocks on Wednesday, taking this month’s outflows to $681 million.

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