Bloomberg News

Indian Stock Futures Decline on Europe, Rating Concerns

June 12, 2012

Indian stocks dropped for a second day as concerns grew that a bailout of Spanish banks will fail to tame Europe’s debt crisis, and after Standard & Poor’s said India may lose its investment-grade credit rating.

Wipro Ltd. (WPRO), the nation’s third-biggest software exporter that gets more than 75 percent of its sales from overseas, fell to a three-week low. State Bank of India, the largest lender, retreated for the second day. The BSE India Sensitive Index (SENSEX), or Sensex, lost 0.2 percent to 16,637.44 at 9:49 a.m. in Mumbai.

Indian stocks ended a five-day winning run yesterday after S&P said slowing growth and political roadblocks to economic policymaking could “hurt its long-term growth prospects and, therefore, its credit quality.” Asian shares declined today as Spanish and Italian bond yields surged amid skepticism Spain’s 100 billion euro ($125 billion) bailout will halt the debt crisis in the European Union, India’s largest trading partner.

“We’re confident India will not default as a country, but if the euro zone crisis deepens then it could increase the risk of defaults of Indian companies and that may trigger a possible downgrade,” said Arun Khurana, a Mumbai-based fund manager at UTI Asset Management Co., which manages $10.6 billion in assets.

India could become the first nation in a group that also includes Brazil, Russia and China to lose its investment-grade rating, S&P said. The agency pared India’s outlook to negative from stable in April, dealing a blow to Prime Minister Manmohan Singh’s development agenda that has been hobbled by a discord among the ruling coalition. Economic expansion in the first quarter was the slowest in nine years.

The government releases data on industrial output today, and on inflation later this week. Factory production probably expanded 1.7 percent in April, according to the median estimate of 31 economists in a Bloomberg survey. That compares with a 3.5 percent contraction in March.

Inflation may have accelerated for a second month to 7.5 percent in May, from 7.23 percent in April, according to the median estimate of 31 analysts in a Bloomberg survey. The data will be published on June 14.

Overseas investors were net buyers of local shares on June 8, purchasing a net $50.6 million of stocks, data from the market regulator show. Foreigners cut holdings by $273 million in May, a second month of net sales. Still, foreigners have invested $8.5 billion in local stocks this year, a record for the period, according to data compiled by Bloomberg.

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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