Bloomberg News

Indian Stocks Swing Between Gains, Losses; Lenders Retreat

October 05, 2011

Oct. 5 (Bloomberg) -- India’s benchmark stock index swung between gains and losses. ICICI Bank Ltd. slid while Mahindra & Mahindra advanced.

ICICI Bank, the second-largest lender, sank 4.1 percent, while State Bank of India, the largest, lost 3.4 percent. The stocks fell for a second straight day after Moody’s Investors Service cut SBI’s financial strength rating yesterday. Most Asian stocks dropped as a downgrade of Italy’s credit rating overshadowed signs that Europe may reach consensus on measures to resolve the region’s debt crisis. Mahindra & Mahindra Ltd., India’s biggest sports-utility vehicle maker, rose 1.4 percent.

The BSE India Sensitive Index, or Sensex, slid 0.4 percent to 15,795.26 at 3:18 p.m. Mumbai time. The gauge, which closed at its lowest level since Aug. 26 yesterday, swung between gains and losses at least eight times. S&P CNX Nifty Index on the National Stock Exchange of India shed 0.3 percent to 4,759.45.

“The uncertainty in global markets is keeping investors worried,” Tejas Doshi, vice president of equity research at Sushil Financial Services Pvt., said by phone. “The SBI rating cut should be seen as a warning sign by the government.”

State Bank’s Tier 1 capital ratio of 7.6 percent as of June 30 is below the 8 percent that the government targets for state- run lenders and lower than that of rivals such as ICICI Bank, Moody’s said yesterday.

Capital Infusion

Moody’s would like to see the government infusing capital into SBI, Chairman Pratip Chaudhuri told Bloomberg UTV today. The government may need to invest as much as 140 billion rupees ($2.8 billion) to increase the capital ratio, he told reporters in New Delhi on Aug. 6.

The downgrade will increase overseas funding costs for the lender as investors seek a higher risk premium, Manish Ostwal and Palak Shah, analysts at Mumbai-based brokerage K.R. Choksey Shares & Securities Pvt., wrote in a note to clients. “The downgrade has come as a shock to us and the market.”

The rating action may raise funding costs for other Indian lenders such as ICICI Bank, the analysts wrote.

ICICI Bank slumped 4.1 percent to 767.90 rupees, headed for the lowest close since September 2009. State Bank sank 3.4 percent to 1,726.25 rupees, set for the lowest since August 2009. HDFC Bank Ltd., the second-largest private lender, lost 1.9 percent to 440.20 rupees.

The BSE India Bankex Index shed 2.6 percent to 9,956.60, set for the lowest close since February 2010. The 14-member gauge has declined 31 percent in the past year.

Festival Season

Most automakers advanced on speculation sales would rise during the festival season, which started with Eid in August and ends in October with Diwali, a festival of lights.

“We expect 10 percent to 12 percent growth during the festival season with original equipment manufacturers offering discounts and aggressive marketing to enhance sales,” Sorabh Talwar, an analyst at HDFC Securities Ltd., said in a note.

Mahindra & Mahindra jumped 1.4 percent to 787.50 rupees. Tata Motors Ltd., the nation’s biggest truck-maker, added 0.7 percent to 147.65 rupees.

Jaiprakash Associates Ltd., a builder of dams, surged 4.9 percent to 71.90 rupees, while cigarettes-to-hospitality group ITC Ltd. climbed 2.2 percent to 195.80 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 drop in the Sensex and making it the gauge’s worst August in at least a decade.

--Editor: Ravil Shirodkar

To contact the reporter on this story: Shikhar Balwani in Mumbai at sbalwani@bloomberg.net;

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net.


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