The rupee rose 0.3% yesterday as markets reopened after a two-day holiday.
Bloomberg
Mumbai
Indian stocks tumbled, sending the benchmark index toward its sixth drop in seven days, after inflation accelerated and a rout in commodities dragged down Asian equities.
Vedanta, the nation’s largest copper producer, sank to a five-week low and aluminum producer Hindalco Industries extended a fourth weekly decline. Oil & Natural Gas Corp, the largeststate-owned oil explorer, decreased 3.5%. Tata Consultancy Services, India’s most valuable company, headed for its lowest close this year.
The S&P BSE Sensex plunged 1% to 25,599.47. India’s consumer prices rose 5% in October from a year ago after a 4.41% increase in September, challenging central bank Governor Raghuram Rajan’s accommodative policy stance before he reviews interest rates a final time this year on December 1. The MSCI Asia Pacific Index slid 1% as US oil lingered below $42 a barrel and copper futures traded near a six-year low amid concerns over China’s slowdown.
“In the near term, the worries remain more on the global cues: First is how the US Fed policy moves and the second is how the Chinese economy shapes up because that will have an impact on commodity prices,” Hemant Kanawala, the head of equities at Kotak Mahindra Old Mutual Life Insurance, which oversees about $2bn in assets, said in an interview with Bloomberg TV India. “If there is weakness globally and a risk off, then India will be impacted by it.” The money manager is overweight on shares of oil refiners, private-sector lenders and automakers.
The Sensex rose 0.5% in a special one-hour trading session for Diwali on Wednesday, with stock markets closed for regular trading on Wednesday and Thursday. The gauge has slumped 2.5% this week, poised for a third weekly loss after Prime Minister Narendra Modi’s Bharatiya Janata Party lost state elections in Bihar, India’s third-most-populous state. The defeat has raised concern that his ability to push through policies to strengthen the economy will be hampered.
US equities accelerated losses on Thursday after the normally dovish New York Federal Reserve President William Dudley said the central bank may need to begin tightening policy.
Fed President James Bullard of St Louis earlier in the day urged raising target rates, while Chicago Fed leader Charles Evans stressed any increases should be “gradual.”
International investors sold a net $106mn of Indian stocks on November 9, paring this year’s inflows to $4.3bn.
The Sensex trades at 15.1 times projected 12-month earnings, compared with a multiple of 11 for the MSCI Emerging Markets Index.
Meanwhile the rupee completed a fifth weekly decline after Prime Minister Narendra Modi’s party lost an election in a key state, heaping more pressure on the government to deliver on reform pledges.
The loss in Bihar, the nation’s third most-populous state, has raised concern Modi’s opponents will block his proposals in Parliament, including the introduction of a goods and services tax and the easing of labour laws. That’s diminished the impact of this week’s relaxation in investment rules, according to Kotak Securities.
“The political setback in Bihar and worries that higher US rates could lead to outflows are weighing on the rupee,” said Anindya Banerjee, associate vice-president for currency derivatives at Kotak Securities in Mumbai.
