Bloomberg
Mumbai
Indian stocks tumbled to a 15-month low, with the benchmark index extending losses after posting the worst weekly decline since 2011, as metal makers and health-care companies retreated amid losses in emerging-market equities.
Vedanta, the largest copper producer, slid for a second day, dragging down the S&P BSE India Metals Index to a two-week low. Sun Pharmaceutical Industries, Dr Reddy’s Laboratories and Lupin, the biggest drugmakers, decreased at least 2.6%, dragging down an industry index to a one-month low. Axis Bank and ICICI Bank, the largest private lenders, were two of the three worst performers on the S&P BSE Sensex.
The Sensex lost 1.2% to 24,893.81, the lowest level since June 2014. The gauge plunged 4.5% last week as concerns about the prospects of higher US interest rates and China’s economic slowdown curbed demand for riskier assets. The declines have brought the index to within 3% of its close on May 16, 2014 when Prime Minister Narendra Modi swept into office with the biggest mandate in 30 years.
“This selloff will continue until China stabilizes or clarity emerges on US interest rates,” RK Gupta, managing director of Taurus Asset Management Co, which has $630mn in assets, said by phone from New Delhi. “Global events have taken precedence over domestic factors.”
Asian equities dropped, with the MSCI Asia Pacific index set for its lowest close since November 2012, after Chinese stocks slumped as trading resumed on the mainland following a four-day weekend. Friday’s US payrolls report showed that while wages and the number of hours worked increased last month, the economy added fewer workers than expected, leaving bets on a rate hike in September around 30%.
The Sensex has retreated 16% from its January 29 record and trades at 14 times projected 12-month earnings, the cheapest since May 2014. Foreigners pulled$2.6bn from local shares in August, the biggest outflow since October 2008, as an impending US Federal Reserve rate rise and a surprise devaluation in the Chinese yuan weakened the appeal of riskier assets. The MSCI Emerging Markets Index is valued at a multiple of 10.3.
Meanwhile the rupee weakened to a two-year low as stocks retreated on speculation demand for emerging-market assets will decline amid prospects of higher US interest rates.
The rupee dropped 0.5% to 66.8275 a dollar in Mumbai, according to prices from local banks compiled by Bloomberg. It reached 66.8650 earlier, the weakest since September 2013. Sovereign bonds fell, with the yield on notes due May 2025 rising five basis point to 7.80%, according to prices from the central bank’s trading system.
“The strong jobs data are supporting dollar bids as the market factors in the possibility of a rate increase” by the Fed, said Rohan Lasrado, head of foreign-exchange trading at RBL Bank in Mumbai.
