India’s Sensex Drops Most in Two Weeks Before RBI Policy Review

  • All 19 economists see RBI leaving rates unchanged Tuesday
  • Bharti Airtel tumbles; Lupin, Sun leads drugmakers lower

Indian stocks fell the most in two weeks before the nation’s central bank reviews its monetary policy on Tuesday.

Bharti Airtel Ltd., the largest mobile-phone operator, was the worst performer on the S&P BSE Sensex. Maruti Suzuki India Ltd., the biggest carmaker, fell for the first time in five days. Sun Pharmaceutical Industries Ltd., the most valuable drugmaker, slid for a sixth day. Mahindra & Mahindra Ltd., the largest tractor maker, climbed to a five-week high.

The Sensex lost 0.2 percent at the close in Mumbai, with bulk of the losses coming in the final hour of the session. All 19 economists in a Bloomberg survey see Reserve Bank of India Governor Raghuram Rajan keeping the benchmark repurchase rate at 6.5 percent on Tuesday, after data last week showed Asia’s third-biggest economy grew a world-beating 7.6 percent in the year ended March 31.

“The markets are not expecting much from the RBI policy; it is likely to maintain the status quo,” A. K. Prabhakar, head of research at IDBI Capital Capital Market Services Ltd., said by phone from Mumbai. “Investors are focused more on the monsoon and its progress. That’s why stocks linked to the agriculture sector are active." He’s advising investors to buy shares of two-wheelers and non-banking finance companies.

The Sensex capped its second weekly gain on Friday amid optimism about the country’s economic growth. Rajan said last month the expectations of above-normal rain will boost food output may help temper inflation after a jump in April. He has reduced the main rate by 150 basis points since the start of 2015 to a five-year low of 6.50 percent.

Fed Odds

Emerging-market stocks gained for a third day as the weakest U.S. jobs data since 2010 boosted optimism the Federal Reserve will delay raising interest rates. The central bank will announce its next rate decision on June 15. Traders are now pricing in a 4 percent chance of an increase this month -- down from 22 percent before the jobs data on Friday -- and a 27 percent probability in July.

Fed Chair Janet Yellen speaks in Philadelphia today and may offer guidance on how much the payrolls report will influence the timetable for tightening monetary policy.

Brexit Vote

Global investors are also focused on the June 23 referendum in Briton whether to leave the European Union or not. On Monday, two polls showed more Britons favor a vote to leave the European Union at a than those who want to stay.

“Clearly a ‘yes’ vote for Brexit would be a major market event," Jonathan Schiessl, U.K.-based head of equities at Ashburton Investments Ltd., which oversees $12 billion, said by e-mail. A vote to leave will begin “a protracted period of political uncertainty in Europe as the whole idea of grouping nation states in larger blocs will be questioned,” he said.

Axis Bank pared last weekly 5.9 percent rally, while State Bank of India pared this week’s loss to 11 percent. Bharti Airtel tumbled to its lowest level since May 24. Maruti lost 1.8 percent, ending a four-day, 3.6 percent climb. Sun Pharmaceutical retreated 1.8 percent, extending last week’s 11 percent plunge.

Mahindra & Mahindra added 1.1 percent, while Tata Motors Ltd. was the best performer on the Sensex after CNBC-TV18 reported the company’s Jaguar Land Rover sales in the U.K. jumped 36 percent year-on-year last month.

Foreign investors bought a net $240 million of local stocks on Friday, taking this year’s inflows to $2.6 billion. The Sensex has climbed 2.5 percent so far this year and is valued at 16.5 times 12-month projected earnings, compared with a multiple of 12 for an index of emerging markets.

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