Indian bystanders watch share prices displayed on a digital broadcast on the facade of the Bombay Stock Exchange building in Mumbai. The Sensex ended down 0.9% to 25,310.33 points yesterday.
India’s benchmark stock index tumbled to a three-month low and the rupee weakened for a fifth day as investors weighed the benefits of lower energy prices against declines in global equities.
Vedanta and Hindalco Industries, the country’s biggest copper and aluminium producers, were among the worst performers on the S&P BSE Sensex index. Oil & Natural Gas Corp, the largest explorer, slid to its lowest price since May 2009 as crude traded near a six-year low. GAIL India the top gas- marketing company, tumbled the most on the index. Coal India fell to a two-month low.
The Sensex lost 0.9% to 25,310.33 at the close in Mumbai. Asian stocks dropped 1.3% after China’s exports declined for a fifth month, while oil slid amid speculation a global glut will persist with the Opec having abandoned its strategy of limiting output. A weak rupee raises the cost of imports for India, which buys about 80% of its oil from overseas.
“Lower oil prices benefit us but a weaker currency dampens that positivity,” Gaurang Shah, vice president at Geojit BNP Paribas Financial Services in Mumbai, said in an interview with Bloomberg TV India. Shah said he’s bullish on companies that gain from lower oil costs, including paint and tyremakers.
The market is also monitoring the goods-and-services bill, which has been repeatedly blocked by Prime Minister Narendra Modi’s opponents, Shah said. The unified sales tax is one of India’s biggest economic reforms since the early 1990s.
Parliament was disrupted yesterday after main opposition Congress party members stalled proceedings.
The protests came a day after the Delhi High Court, in a blow to the main Congress party leaders Sonia and Rahul Gandhi, declined to give them any relief in the National Herald case, asking them to appear before the trial court. They will appear in court on December 19, lawyer Abhishek Singhvi told reporters in New Delhi.
Modi needs to win over the Congress party to push through the GST bill. While Modi met Sonia Gandhi last month to discuss a compromise, the recent development may make it difficult for government to reach any compromise on the measure.
“I have my doubts if the GST bill will be passed in this session, going by our history of parliamentary disruptions,” Chokkalingam G., managing director at Equinomics Research, said in an interview to Bloomberg TV India. “Sadly, we will have to live with that disappointment.”
China’s imports fell for a record 13th straight month, albeit at a slower-than-estimated pace. The drop is a drag on other economies as the nation’s flagging industrial plants need less raw materials while robust consumer demand hasn’t picked up fast enough to offset those declines. Oil has plunged about 40% in the past year while iron ore trades at a record low.
“The crash in crude oil and iron ore prices shows an increase in deflationary pressures globally and that’s more worrying than India’s macroeconomic fundamentals, which are improving,” Chokkalingam said. “An increase in rates by the Fed will give some comfort to the Indian market as it would help ease the deflationary pressure globally.”
Vedanta plunged 4.5%, extending the year’s loss to 59%. Hindalco tumbled 4.1%, the most since November 18. Oil & Natural Gas slid 3.6% to its lowest price since May 2009. GAIL India tumbled the most since August 24. Coal India lost 2.9%.
The Sensex has fallen 8% this year and trades at 14.9 times projected 12-month earnings, the least expensive in two months. The MSCI Emerging Markets Index has lost 17% and is valued at a multiple of 11.
Overseas investors sold a net $6.3mn of Indian stocks on December 7, paring this year’s inflows to $2.9bn. They sold $1.1bn last month.
Meanwhile the rupee weakened for a fifth day, capping the longest run of declines since August. The currency, which fell 2.1% last month in Asia’s worst performance, dropped 0.2% to 66.84 a dollar, prices from local banks compiled by Bloomberg show.
India’s 10-year bonds dropped, pushing the yield to a three-month high, on speculation demand for debt is weakening ahead of a potential increase in US interest rates this month.
Overseas holdings of rupee notes fell Rs20.7bn ($310mn) in the last three days, National Securities Depository data show.
Primary dealers rescued a sale of sovereign bonds on Friday by picking up unsold debt fuelling speculation investors sought higher coupons after benchmark 10- year yields rose in November by the most since June. Futures contracts show a 78% chance the Federal Reserve will raise rates at its December 15-16 meeting.
The yield on Indian securities due May 2025 climbed four basis points to 7.80% in Mumbai, its highest close since September 7, according to prices from the Reserve Bank of India’s trading system. It rose 15 basis points last month and is up one basis point in December. That’s despite the RBI buying Rs100bn of bonds on Monday in its first open-market purchase since January 2014.
“While there isn’t much appetite for bonds ahead of the Fed meeting, the supply remains on schedule and that’s causing a demand-supply mismatch,” said Badrish Kulhalli, a fixed-income fund manager at HDFC Standard Life Insurance Co in Mumbai. “At this stage, more open-market bond purchases by the central bank may help bring a relief rally.”
India’s government plans to sell Rs150bn of debt at Friday’s weekly auction. Fifteen states sold Rs156.10bn of notes yesterday.
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