Indian stocks declined from a six-week high as drugmakers tumbled amid losses in Asian equities after the Bank of Japan held off from adding to record monetary stimulus.
Lupin was the worst performer on the S&P BSE Sensex on report the company’s Goa unit received observations from the US FDA. Sun Pharmaceutical Industries, India’s most valuable drugmaker, slid to a one-month low. Tata Motors declined for the first time in 10 days.
The benchmark BSE Sensex closed down 1.02%, or 253.11 points, at 24,551.17, while the broader NSE Nifty fell 1.04%, or 78.15 points, to end at 7,460.60.
Benchmark gauges in Europe and Asia fell from their highest closes since January, as the BoJ maintained a negative policy rate and kept its target for increasing the monetary base unchanged.
The move comes after the European Central Bank announced unprecedented stimulus last week and monetary authorities will remain the focus of investor attention with the Federal Reserve due to conclude a review today.
“We’re seeing profit-taking as markets are indecisive ahead of the Fed meeting,” Anita Gandhi, a director at Arihant Capital Markets, said by telephone from Mumbai. “Activity is subdued despite the positive inflation data.”
Data on Monday showed India’s inflation eased more than estimated in February, boosting speculation that central bank Governor Raghuram Rajan will lower interest rates after the government stuck with a plan to narrow the budget gap.
Rajan on Saturday said the central bank was “comforted” by Prime Minister Narendra Modi’s plan to shrink the budget deficit to 3.5% of GDP while telling reporters to “wait and see” how that feeds into monetary policy. He’s scheduled to review policy on April 5 as looks to keep CPI within 5% by March 2017.
“The RBI may cut by 25 basis points, more out of appreciation that the government has contained the fiscal deficit to 3.5%,” Hemant Kanawala, head of equities at Kotak Mahindra Old Mutual Life Insurance, which oversees about $2bn in assets, said in an interview with Bloomberg TV India. “The monsoon will be a key variable they may want to wait for.”
While India is forecast to overtake a slowing China as the world’s fastest-growing big economy, back-to-back years of poor rainfall have eroded incomes of the bulk of the nation’s population even as rising bad loans at lenders have weighed on their profits. The Sensex has declined 6% this year.
Lupin plunged 7.8%, the most since November 2008. Sun Pharmaceutical lost 2.2%. Cipla shed 2.3%. Dr Reddy’s Laboratories dropped 3.1%, the most since February 9.
Housing Development tumbled 4.1% to extend this year’s loss to 12%. Tata Motors fell 1.7%, ending a nine-day, 21% rally.
ITC, India’s biggest cigarette company, declined 2.6%, while Hindustan Unilever lost 1.9%.
Overseas funds bought $188mn of Indian shares on March 14, boosting the month’s inflow to about $1.7bn. The Sensex has rallied 6.7% this month and trades at 15 times 12-month projected earnings. The MSCI Emerging Markets Index is valued at a multiple of 11.4.
Meanwhile the rupee yesterday closed 0.42% weaker against the US dollar, the maximum single-day fall in one month, tracking the fall in local equity and Asian currency markets.
The currency closed at 67.38—a level last seen on March 2—down 0.42%, the maximum fall since February 16, from its previous close of 67.11. The rupee opened at 67.22 and touched a high and a low of 67.17 and 67.42, respectively.
Currency traders also keenly await the US Federal Reserve’s stance on key policy rates after its two-day policy meet scheduled for today and tomorrow.
India’s 10-year bond yield closed at 7.582%—a level last seen on 20 October 2015, as compared with its Monday’s close of 7.599%.
Asian currencies closed lower. Indonesian rupiah was down 0.81%, Malaysian ringgit 0.77%, Philippines peso 0.35%, Singapore dollar 0.28%, China offshore 0.22%, China renminbi 0.24%, Taiwan dollar 0.15%, South Korean won 0.13%, and Thai baht 0.09%. However, Japanese yen was up 0.67%.
The dollar index, which measures the US currency’s strength against major currencies, was trading at 96.72, up 0.09% from its previous close of 96.624.