Dec. 29 (Bloomberg) -- Indian stocks dropped the most in Asia after the European Central Bank’s balance sheet soared to a record, fueling concerns the debt crisis in the Asian nation’s biggest trading partner is worsening.
Reliance Industries Ltd., the nation’s most valuable company, sank to its lowest since March 2009. Tata Power Co., the biggest electricity generator outside state control, fell for the first time this week. Maruti Suzuki India Ltd. retreated 3.9 percent, extending this year’s plunge to 35 percent.
The BSE India Sensitive Index, or Sensex, retreated 1.2 percent to 15,543.93 at the 3:30 p.m. close in Mumbai. The gauge has slumped 24 percent in 2011, heading for the second-largest annual loss in three decades, on concern a falling rupee, inflation and record interest-rate increases will worsen the effects of the European crisis on corporate earnings. The European Union accounts for about 20 percent of India’s exports.
“The global issues are not going to change in a hurry and I don’t see a solution coming up immediately,” Anup Bagchi, chief executive officer of ICICI Securities Ltd., said in an interview with Bloomberg UTV today. “I must confess that most professionals have gone wrong in reading the market. Globally, the volatility has been very high, plus we have problems of our own.”
The 30-stock gauge trades at 13.5 times estimated profits, down from 21.5 times in March 2010. The MSCI Emerging Markets Index is valued at 10 times after dropping 21 percent this year.
Reluctance to Lend
Global equities slumped yesterday after the ECB’s balance sheet rose to an all-time high of 2.73 trillion euros ($3.53 trillion). The central bank awarded 523 banks three-year loans last week totaling a record 489 billion euros to encourage lending and stem the region’s debt crisis. The banks, reluctant to lend, have parked the money back at the ECB. Overnight deposits at the central bank have increased to an all-time high of 452 billion euros.
Stocks also declined on concern India’s current-account deficit widened to a record. The deficit reached an unprecedented $17 billion in the three months ended Sept. 30, according to the median estimate of seven economists surveyed by Bloomberg before a Reserve Bank of India report due tomorrow.
Shrinking that gap “will not be easy” as a cooling economy curbs tax collections and a slump in stocks stalls plans to sell stakes in state-run companies, the finance ministry said this month.
India’s bonds are headed for their worst year since 2009 as slowing government revenue threatens efforts to cut the deficit and fuels concern the nation will continue to sell a record amount of debt.
The S&P CNX Nifty Index on the National Stock Exchange of India Ltd. lost 1.4 percent to 4,646.25. The BSE 200 Index fell 1 percent.
Reliance Industries, owner of the world’s largest refining complex, sank 3.7 percent to 711.9 rupees, extending this year’s loss to 33 percent. Tata Power tumbled 3.8 percent to 88.5 rupees, ending a three-day 4.5 percent rally.
Maruti plunged 3.9 percent to 921.75 rupees. The stock has dropped 35 percent this year and is the worst-performing auto company on the Sensex.
Earnings forecasts for Sensex companies for the year ending in March 2012 have fallen 8.7 percent to 1,150 rupees per share, the biggest drop since the 12 months ended March 2009, according to about 1,500 estimates compiled by Bloomberg.
Parliamentary gridlock, inflation, a widening deficit and the weakest quarterly economic growth in two years have sent the rupee tumbling this year, hurting Indian companies that have a record $11.4 billion of dollar bonds to repay in 2012. The debt coming due next year is double the five-year average of $5.6 billion, data compiled by Bloomberg show. A weak currency also boosts import prices in a country that imports 80 percent of its fuel.
Overseas investors bought a net 3.64 billion rupees of Indian stocks on Dec. 27, paring their withdrawals this year to 22.7 billion rupees, data from the Securities & Exchange Board of India show.
--Editors: Abhay Singh, Vipin V. Nair
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