Bloomberg News

India Stocks Drop to 2-Week Low as Oil Prompts Inflation Concern

February 26, 2012

India’s benchmark stock index fell to its lowest level in two weeks amid concern rising oil prices will threaten the government’s efforts to curb inflation and interest rates.

Larsen & Toubro Ltd. (LT), the nation’s biggest engineering company, slid to a two-month low. ICICI Bank Ltd. (ICICIBC), country’s largest private lender, dropped to the lowest in a month.

The BSE India Sensitive Index (SENSEX), or Sensex, fell 0.7 percent to 17,796.54 at 9:43 a.m. in Mumbai, set for its lowest level since Feb. 13. The S&P CNX Nifty (NIFTY) Index on the National Stock Exchange of India Ltd. slid 0.7 percent to 5,388.10. The BSE 200 Index declined 0.4 percent to 2,189.73.

Oil climbed for a seventh day on Feb. 24, the longest run of gains since Jan. 10, to settle at a nine-month high. Higher energy price raise costs for consumers and companies in India, which imports three-quarters of its oil needs.

The 30-company Sensex had its first weekly loss in eight last week on concern oil-price gains may fuel inflation and prevent the Reserve Bank of India from easing monetary policy.

Consumer prices rose 7.65 percent in January from a year earlier, exceeding the 6.55 percent advance in the benchmark wholesale price index last month, according to government data last week. Central-bank Deputy Governor Subir Gokarn said this month that the authority will reduce borrowing costs once it’s confident inflation will keep slowing.

The RBI pared banks’ reserve requirements last month for the first time since 2009. The bank meets for its next policy review on March 15.

To contact the reporter on this story: Santanu Chakraborty in Mumbai at schakrabor11@bloomberg.net

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


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