Bloomberg News

Indian Stock Futures Drop as Funds Sell Shares on Rupee

May 28, 2012

Indian (SENSEX) stocks climbed to more than a two-week high as the rupee strengthened and Asian equities rose after opinion polls of Greek voters allayed concern the country will exit the euro area.

ITC Ltd. (ITC), the biggest cigarette company, rose the most in more than a week. State Bank of India, the biggest lender, led its peers higher. Tata Motors Ltd. (TTMT), India’s largest truckmaker, rallied to an almost two-week high.

The BSE India Sensitive Index, or Sensex, rose 1.2 percent to 16,416.84 at close, its highest level since May 10. Reserve Bank of India Governor Duvvuri Subbarao pledged last week to take steps as needed to stabilize the rupee, helping it recover from a record low on May 24, the day the government allowed the first increase in gasoline costs in almost seven months to curb the budget deficit.

“The rupee fall has triggered a small crisis, a crisis of growth, of stability and it will give room for the government to act in a significant manner,” Rashesh Shah, chairman of the Edelweiss Group in Mumbai, told Bloomberg UTV. “The government is getting ready to act. I won’t be surprised if in the next three months we start seeing action to attract foreign flows and on opening up of the retail and insurance sectors.”

The rupee touched 55.01 per dollar, the strongest since May 22, and closed at 55.1863. The Dollar Index, which tracks the greenback against six major trading partners, slid for the first time in a week as investors returned to riskier assets.

‘Risk Appetite’

Greece’s New Democracy party, which supports the European Union’s bailout plan, was placed first in all six opinion polls published on May 26 as campaigning continued for a general election next month. The MSCI Asia Pacific Index (MXAP) increased 0.7 percent to 112.44 as of 7:47 p.m. in Tokyo, rebounding from a five-month low.

“The positive political developments from Greece have improved risk appetite,” Pramit Brahmbhatt, Mumbai-based chief executive officer at the Indian unit of Alpari Financial Services, wrote in a research note. “A modest retreat in the Dollar Index” has lifted the rupee, he wrote.

The Sensex has fallen 11 percent from its Feb. 21 high, exceeding the 10 percent decline that signifies a correction to some investors. The rupee has lost 8 percent since April 1, as a record trade deficit and the widest budget shortfall in the biggest emerging markets, elevated inflation and faltering efforts to revive economic growth has worsened India’s outlook.

Foreign investors sold a net $65.3 million of local stocks on May 25, extending this month’s sales to $242 million, data from the market regulator show. Overseas investors turned net sellers of local shares in April for the first time in 2012, contributing to the rupee’s weakness. Still, their investments of a net $8.5 billion into domestic equities so far this year is a record for the period, the data show.

‘Tough Measures’

“RBI’s focus has shifted to managing the rupee, which is positive” for stocks, B. Gopkumar, executive vice president at Kotak Securities Ltd., said by phone. “Also, the central bank is emboldened to take tough measures after the government hiked gasoline prices last week. We hope to see meaningful policy actions in the year ahead.”

ITC climbed 1.4 percent to 235.05 rupees. SBI advanced 4.7 percent to 2,101.3 rupees, ICICI Bank Ltd. (ICICIBC) rose 2.4 percent to 834.4 rupees and HDFC Bank Ltd. (HDFCB) increased 1.8 percent to 508.8 rupees. The BSE India Bankex Index of 14 lenders gained to the highest level since May 7.

Tata Motors gained 2.8 percent to 276.6 rupees. The Sunday Telegraph reported the company’s Jaguar Land Rover unit may report an increase in annual pretax profit tomorrow, driven by demand in Asia.

Reliance Communications Ltd. (RCOM) jumped 2.9 percent to 67.4 rupees as India’s second-largest mobile-phone operator reported fourth-quarter profit of 3.32 billion rupees, beating analyst estimates. Suzlon Energy Ltd. (SUEL) fell 1 percent to 20.65 rupees after India’s biggest maker of wind turbines posted a surprise loss as sales declined and finance costs increased.

Seven out of 22, or 32 percent, of Sensex companies posted March-quarter profits that trailed analyst estimates. A total of 47 percent of Sensex companies missed earnings forecasts in the December quarter, compared with 40 percent in the previous three-month period.

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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