Bloomberg News

India Stock Futures Drop as U.S., Europe Fan Weak Rupee

May 18, 2012

Most Indian stocks declined, with the benchmark index heading for its fourth weekly loss, as U.S. economic data and a worsening European debt crisis prompted investors to sell emerging-market assets.

Tata Motors Ltd. (TTMT), the Indian owner of Jaguar Land Rover, tumbled to a three-month low. Bharat Heavy Electricals Ltd. (BHEL), the country’s biggest power-equipment producer, plunged to a five- year low. State Bank of India, the biggest lender, surged the most in a week after reporting a record four-quarter profit. (SBIN)

The BSE India Sensitive Index (SENSEX), or Sensex, lost less than 0.1 percent to 16,058.46 at 2:10 p.m. in Mumbai, erasing an intraday fall of 1.6 percent. Three shares declined for every two that advanced. Almost $4 trillion has been wiped from global equity markets so far this month as Greece’s failure to form a government rekindled Europe’s debt crisis and signs of slowing economic growth in China and U.S. damped the outlook for world demand. Europe is India’s largest trading partner.

“Investor sentiment seems to be universally bearish,” Neelkanth Mishra, head of Indian equity strategy at Credit Suisse Group AG, told Bloomberg UTV today. “Usually that would mean the markets don’t have more downside. But given investors’ perception of the risks existing in Europe, fears of a slowdown in China and the macro issues in India, I don’t think markets are cheap enough.” A Sensex of 13,500 to 14,000 would be a “reasonable level” to start buying, he said.

U.S. economic reports yesterday showed jobless claims in the nation were unchanged at 370,000 in the week ended May 12. The Bloomberg Consumer Comfort Index fell in the week ended May 13 to minus 43.6, a level associated with recessions or their aftermaths, from minus 40.4 in the previous period. In Europe, Moody’s Investors Service cut debt ratings at 16 Spanish banks, citing a recession and mounting loan losses. Greece’s rating was reduced one level by Fitch Ratings.

‘Risk Off’

The MSCI Asia Pacific Index slid 2.6 percent to 112.50, its biggest drop since November. The index entered a co-called correction yesterday after falling more than 10 percent from a Feb. 29 high. The Sensex has fallen 13 percent from its Feb. 21 high and is valued at 12.5 times estimated earnings, the lowest in more than three years, data compiled by Bloomberg show. That compares with a multiple of 9.7 times for the MSCI Emerging Markets Index. The Indian rupee hit a record low today.

“Risk has been taken off the table,” Andrew Holland, chief executive officer of investment advisory at Ambit Capital Pvt. in Mumbai, said in an interview to Bloomberg UTV today. “It’s not just India; the rest of Asia is down considerably.”

‘Ferocious Headwinds’

Concern India’s outlook has worsened because of trade and fiscal deficits, policy gridlock, elevated consumer prices and slowing global growth has made the rupee Asia’s worst performer this quarter. The Dollar Index rose 1.7 percent this week, the most since December.

“Strong market forces in favor of the dollar have created panic,” said J. Moses Harding, executive vice president at IndusInd Bank Ltd. in Mumbai. “The Reserve Bank of India does not have enough ammunition to fight against the tsunami-like ferocious headwinds the rupee is facing.”

India VIX, which measures the cost of protection against losses in the S&P CNX Nifty (NIFTY) Index, added 1.9 percent to 24.03, the highest level since March 29. The Nifty gained 0.1 percent to 4,873.75. Both the Sensex and Nifty indexes are poised for a fourth straight weekly loss of at least 1.1 percent each. The BSE 200 Index (BSE200) fell less than 0.1 percent to 1,984.07.

A total of 750 million shares traded on the BSE and NSE yesterday, 17 percent less than the 12-month daily average.

Biggest Gainer

Tata Motors sank 4.9 percent to 257.85 rupees. Today’s drop pared this year’s rally to 44 percent, still the biggest gainer on the Sensex this year. Maruti Suzuki India Ltd. (MSIL) tumbled 4.1 percent to 1,156.3 rupees.

Bharat Heavy lost 3.8 percent to 198.35 rupees, its lowest level since March 2007. Infosys Ltd. (INFO), the second-largest software exporter that gets 21 percent of its sales from Europe, fell 1.5 percent to 2,335.6 rupees.

State Bank rallied 3.9 percent to 1,919.8 rupees. Profit climbed to 40.5 billion rupees ($738 million) for the quarter ended March, compared with the 35.3 billion rupee median of 41 estimates compiled by Bloomberg. The stock rose as the bank’s risk buffers widened following a 79 billion rupee infusion of capital by the government, while the bad-debt ratio narrowed from December levels.

ICICI Bank Ltd. (ICICIBC), the country’s second-biggest lender, rose 1.8 percent to 801.9 rupees, erasing an earlier fall of as much as 2.6 percent. Reliance Industries Ltd. (RIL), owner of the world’s largest refining complex, gained 1 percent to 691.85 rupees.

Foreign funds sold a net $88.7 million of local stocks on May 16, paring their investment this year to $8.7 billion, according to the nation’s market regulator. Overseas funds sold a net $102.6 million of shares in April, deterred by proposed changes in tax rules, after remaining net buyers in each of the first three months of 2012.

To contact the reporter on this story: Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net

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


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