Oct. 4 (Bloomberg) -- India’s benchmark stock index fell to its lowest level in more than five weeks as bank stocks sank after Moody’s Investors Service reduced the financial strength rating for State Bank of India.
State Bank, the nation’s largest lender, slid 4 percent, its lowest close in more than two years. Moody’s cut the bank’s standalone rating to ‘D+’ from ‘C-’ citing deteriorating asset quality, according to a statement from the ratings company today. ICICI Bank Ltd., the biggest non-state lender, shed 4.6 percent. Tata Motors Ltd. plummeted 4.5 percent.
“The downgrade has come as a rude shock,” said Suraj Saraogi, managing director at Keynote Capitals Ltd. in Mumbai. “Markets are reacting as investors didn’t expect this.”
The BSE India Sensitive Index, or Sensex, tumbled 1.8 percent, to 15,864.86 at the 3:30 p.m. close in Mumbai, the lowest close since Aug. 26. The gauge fell as low as 15,745.43, bringing its loss from a Nov. 5 peak of 21,108.64 to 25 percent.
The Sensex has declined 23 percent this year amid concern a global slowdown may combine with record increase in borrowing costs to erode corporate profits. Companies in the gauge trade at 13.4 times estimated earnings, down from 21.5 times in March 2010. The MSCI Emerging Markets Index trades at 9 times.
Developing-nation equities fell, with the MSCI Emerging Markets Index set for its lowest close since September 2009. German Finance Minister Wolfgang Schaeuble opposed moves to increase the scale of the euro rescue fund, stoking concern the region’s debt problems may worsen amid growing global frustration with the region’s inability to get to grips with the crisis after 18 months of incremental steps.
Stocks in emerging markets have trailed their counterparts in developed countries this year as Europe’s debt crisis and a faltering U.S. economy led investors to flee riskier assets. The MSCI Emerging Markets Index extended its decline from a May 2 high to 31 percent today. The measure lost 2.2 percent to 833.50 at 4:35 p.m. local time.
The S&P CNX Nifty Index on the National Stock Exchange of India Ltd. declined 1.6 percent to 4,772.25. The BSE-200 Index slid 1.6 percent to 1,960.32.
State Bank paced declines among Indian peers, plunging 4 percent to 1,787.20 rupees, the lowest close since Sept. 4, 2009. ICICI Bank tumbled 4.6 percent to 800.95 rupees, the lowest close since February 2010.
“Our expectations that non-performing assets are likely to continue rising in the near term -- due to higher interest rates and a slower economy -- have caused us to adopt a negative view on SBI’s creditworthiness” said Beatrice Woo , a vice-president and senior credit officer at Moody’s.
The BSE India Bankex Index shed 3.1 percent to 10,219.03, the lowest close in more than 16 months. The 14-member gauge has declined 29 percent in the past year.
Maruti Suzuki India Ltd., which makes almost half the cars sold in India, rallied 2.8 percent to 1,107.85 rupees, the most on the Sensex today, after the central bank ended restrictions on purchases of the automaker’s shares by foreign funds.
Tata Motors plummeted 4.5 percent to 146.70 rupees. Output at the Pantnagar plant in northern India was partially affected after a curfew was imposed in the area, Debasis Ray, a spokesman, said by phone today.
Coal India Ltd., the world’s largest producer of the fuel, plunged 5 percent to 319.90 rupees, its lowest close since Feb. 25. Mahindra & Mahindra Ltd., India’s biggest sports-utility vehicle maker, tumbled 4.2 percent to 776.80 rupees, while Reliance Industries Ltd., the operator of the world’s largest refining complex, slid 2.1 percent to 771.60 rupees.
Overseas investors sold a net 7.8 billion rupees ($158.3 million) of local stocks on Oct. 1, taking their outflows from equities this year to 13.8 billion rupees, according to data on the website of the market regulator. They withdrew a net $2.4 billion in August, the most since October 2008, triggering an 8.4 percent decline in the Sensex and making it the gauge’s worst August in at least a decade.
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