Bloomberg
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India’s benchmark stock-index declined to a two-month low, led by pharmaceutical and automobile companies, as foreigners sold local shares for a fifth day amid a plunge in global markets.
Sun Pharmaceutical Industries tumbled to a seven-week low, sending a drug makers index to a third day of losses. ITC, a cigarette maker with the highest weighting in the S&P BSE Sensex, had its biggest four-day drop in six months. Hero MotoCorp lost 2.3%, dragging down a gauge of auto stocks for a fifth day, the longest run since December 2013.
The Sensex dropped 0.3% to 26,710.13 at the close, after falling the most since July on Tuesday. Foreigners pulled $334mn from local shares in five days through December 15 as the selloff in global equities cools demand for riskier assets. The withdrawal comes as Prime Minister Narendra Modi’s push to woo more foreign investment into insurance is being delayed by a disruption in the upper house of parliament.
“There’s been an overwhelming negative change worldwide, and in India, economic reforms have been very underwhelming,” Madhav Dhar, managing partner of US-based GTI Capital Group, said in an interview with Bloomberg TV India yesterday. “When you have a combination of those countervailing forces with extended prices, people get impatient and sell.”
The Sensex’s five-day retreat is the longest such streak since mid-July.
The MSCI Asia Pacific Index slid 0.4%, the lowest level since October 17, and oil traded at a five-year low in New York before the US Federal Reserve ends a two-day meeting on monetary policy later yesterday. Economists predict that Russia’s currency crisis and plunging crude won’t stop the Fed’s policy makers from dropping a vow to keep interest rates low for a “considerable time.”
“The fall in oil has created instability at the economic level in nations like Russia and Brazil, which in turn has led to a degree of risk aversion in the markets,” Sankaran Naren, chief investment officer at ICICI Prudential Asset Management Co in Mumbai, said in an e-mail. The drop in India “is the collateral impact of the current situation in these countries,” he said.
The CNX Nifty Index slid 0.5%, taking the five-day loss to 3.9%, the most since the period ended July 14. The India VIX Index, a gauge of protection against stock market swings, rose 3.8% to 16.9, the highest since July 9.
The Sensex has rallied 26% this year, on course for its best annual performance since 2009. The gauge is valued at 14.7 times projected 12-month earnings, the cheapest since May. The MSCI Emerging Markets Index trades at a multiple of 10.6.
Proceedings in the upper house of India’s parliament, where the insurance bill is due to be debated, were adjourned for a third day as opposition parties called on hard-line Hindu groups allied to the Bharatiya Janata Party to stop forced religious conversions. The groups denied the claims, saying Christians and Muslims are freely choosing India’s dominant religion.
Prime Minister Modi lacks an upper house majority and needs opposition support to enact legislation, with the ongoing session due to end on December 23. Pressure on the government to boost economic outlook is mounting after growth slowed last year.
Rupee weakens for third day
India’s rupee weakened a third day, touching a 13-month low, on speculation demand for emerging-market assets will suffer as global growth falters and investors prepare for higher US interest rates next year.
The currency pared losses as state-run lenders likely sold dollars on behalf of the Reserve Bank of India, according to three Mumbai-based traders who asked not to be identified.
“Investors are cautious ahead of the FOMC meeting on expectations it will give some signal about the rates,” said Navin Raghuvanshi, a currency trader at DCB Bank in Mumbai. “The overall global sentiment is not conducive for emerging markets” and year-end dollar demand from local oil companies is also impacting the rupee, he said.
The currency fell 0.1% to close at 63.6225 a dollar in Mumbai, according to prices from local banks compiled by Bloomberg. It earlier fell 0.5% to 63.8850, the lowest level since November 13 last year.
The yield on Indian sovereign bonds due July 2024 dropped two basis points, or 0.02 percentage point, to 7.97%, prices from the RBI’s trading system show. The rate climbed to 8.03% earlier.
One-year interest-rate swaps, derivative contracts used to guard against swings in funding costs, were little changed at 7.92% after earlier rising as high as 7.99% earlier, according to data compiled by Bloomberg.
Three-month offshore non-deliverable forwards for the rupee fell 0.3% at 64.68 a dollar, data compiled by Bloomberg show. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.