Oct. 3 (Bloomberg) -- India’s stock-index futures fell, signaling the benchmark index may extend its biggest slump in three years, as slowing U.S. incomes and consumer spending stoked concern earnings at Indian exporters will falter.
SGX S&P CNX Nifty Index futures for October delivery declined 67.5 points, or 1.4 percent, to 4,863.5 at 10:18 a.m. in Singapore. The futures are derived from the 50 stocks on the underlying S&P CNX Nifty Index on the National Stock Exchange of India, which dropped 1.4 percent to 4,943.25 on Sept. 30. The BSE India Sensitive Index, or Sensex, fell 1.5 percent to 16,453.76.
U.S. consumer spending slowed in August as incomes unexpectedly declined for the first time in almost two years. Gains in U.S. payrolls in September were probably too small to reduce joblessness and manufacturing almost stalled as concern mounted that the global recovery was losing momentum, economists said before reports this week.
“What is not in the price now is a continued recession scenario, which might come in the global economies,” K. Ramanathan, chief investment officer at ING Investment Management Pvt., said in a interview on Bloomberg UTV. “Inflation, interest-rate increases and a domestic slowdown have already been accounted for. Consensus corporate earnings growth estimates have been brought down significantly.”
The Sensex slumped 13 percent last quarter, the biggest loss since the three months ended December 2008, on concern the central bank’s record series of interest-rate increases may compound the effects of Europe’s sovereign-debt crisis and slowing economic growth in the U.S. on corporate profits. Companies in the gauge trade at 13.6 times estimated earnings, compared with 9.4 times on the MSCI Emerging Markets Index.
The Reserve Bank of India raised its repurchase rate for a 12th time since March 2010 on Sept. 16 to contain prices that are rising the fastest among so-called BRICS nations of Brazil, Russia, India, China and South Africa. India’s wholesale-price inflation reached a 13-month high of 9.78 percent in August, staying above 9 percent for nine months, while food prices accelerated for the first time in four weeks last week. The bank meets on Oct. 25 for its next policy review.
India’s inflation rate remains above the level the central bank deems acceptable, Governor Duvvuri Subbarao indicated last week, underscoring that pressure remains for monetary tightening in Asia’s third-largest economy.
“Above a threshold, you can’t accept high inflation to have higher growth,” Subbarao said on Sept. 26. India’s economy will grow 7.8 percent in 2011, the International Monetary Fund said in its World Economic Outlook on Sept. 20, slower than the 8.2 percent estimated in June.
“I do think that we are approaching the peaking of the interest-rate cycle,” Vibhav Kapoor, group chief investment officer at IL&FS, said in an interview with Bloomberg UTV last week. “But I doubt whether interest rates can start coming down immediately.”
India’s rupee weakened by the most in three years in September as Asian currencies slumped on concern the global economy is headed for a recession, dimming the outlook for exports and prompting investors to favor safer bets than emerging-market assets. Indian software exporters get about three-quarters of their revenue from overseas.
Infosys Ltd., India’s second-biggest software-services provider, will report results on Oct. 12, the first company in the Nifty to post earnings for the quarter ending Sept. 30.
“I don’t think that the market is suddenly going to react very positively to earnings,” Vibhav Kapoor, group chief investment officer at IL&FS, said in an interview with Bloomberg UTV. “There is still going to be a lot of concern on how things are going to go into the third and fourth quarter. I don’t think it’s going to lead to a great upside.”
Profits for 47 percent of Sensex companies missed analyst estimates in the three months ended June, according to Bloomberg data. That compares with 33 percent that lagged behind forecasts in the previous quarter.
Indian Oil Corp. may gain after the nation’s largest refiner increased the price of jet fuel in Mumbai to 59,359 rupees ($1,212) a kiloliter starting Oct. 1, from 58,452.31 rupees.
Maruti Suzuki India Ltd., which makes almost half the cars sold in India, may be active after it said on Oct. 1 workers will resume duties today as the company resolved a labor dispute that had disrupted production at its Manesar plant. Sales fell 21 percent from a year earlier to 85,565 vehicles in September, the company said. Tata Motors Ltd., the biggest commercial vehicle maker, said total sales rose 22 percent in September to 78,786 units.
Overseas investors bought a net 2.52 billion rupees ($51.5 million) of Indian stocks on Sept. 28, reducing their outflow from equities this year to 2.92 billion rupees, according to data on the website of the Securities and Exchange Board of India. They withdrew a net $2.4 billion in August, the most since October 2008.
--Editors: Matthew Oakley, Darren Boey
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