India Stocks Fall as Volatility Rises on Inflation, Gujarat Poll

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Sonal Varma, chief India economist at Nomura, discusses inflation in India and her outlook for India’s economy.

India’s benchmark equity index fell, after swinging between gains and losses, as weak macro data and investor bets on the outcome of the Gujarat state elections drove volatility higher.

The S&P BSE Sensex dropped 0.5 percent, after rising as much earlier in the session, to close at 33,053.04 in Mumbai. Seventeen out of the 19 sectoral sub-indexes compiled by BSE Ltd. declined led by gauges of real estate and metal stocks. Cipla Ltd. was the worst performer on the Sensex, falling 2.1 percent. A gauge of stock volatility climbed to its highest level since January.

Consumer prices rose 4.9 percent in November from a year earlier as food and fuel costs surged, the Statistics Ministry said after markets closed on Tuesday. That’s the fastest pace in 15 months and exceeded all estimates in a Bloomberg survey, pushing the yield on the 10-year sovereign bond to the highest since July 2016 on Wednesday.

“The market has discounted the inflation and factory output numbers and is now building up levels ahead of Gujarat exit polls that’ll start rolling out after end of voting on Thursday,” said Sanjay Sinha, founder of Mumbai-based Citrus Advisors. “It’s a significant event and victory alone won’t be enough if the ruling BJP doesn’t do it better than the last polls.”

Exit polls for Gujarat will be declared on Thursday evening. The counting of votes and the results will be out on Dec. 18.

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