Most Indian stocks dropped as heightened concern that Europe, the nation’s largest trading partner, will struggle to contain its debt crisis outweighed speculation the central bank will cut rates.
Maruti Suzuki India Ltd. (MSIL), the nation’s biggest carmaker, slumped 3.3 percent, pacing losses among its peers after a local newspaper reported that the government may impose an additional tax on diesel vehicles. Hindustan Unilever Ltd. (HUVR), the a unit of the world’s second-largest consumer goods company, jumped 3.3 percent.
The BSE India Sensitive Index (SENSEX), or Sensex, rose 0.1 percent to 16,883.39, according to preliminary closing prices at 3:30 p.m. in Mumbai, with 18 of the gauge’s 30 stocks ending lower. European stocks fell as borrowing costs rose at debt auctions by Germany and Italy.
Official data yesterday showed India’s factory output grew less than estimated in April, adding to the case for an interest-rate cut, before a government report tomorrow that analysts predict will show inflation accelerated for a second month. The Sensex had its best weekly gain of 2012 last week on speculation the Reserve Bank of India bank will join regional policy makers in cutting borrowing costs to revive growth.
The 30-stock gauge has advanced 9.2 percent this year and trades at 13.2 times estimated earnings, near the lowest level in more than three years, data compiled by Bloomberg show. That compares with the MSCI Emerging Markets Index’s 10 times.
Overseas investors were net buyers of local shares for a fourth day on June 11, purchasing a net $39 million of stocks, data from the market regulator show. Foreigners cut holdings by $273 million in May, a second month of net sales. Still, funds have placed a net $8.5 billion in Indian equities this year, a record for the period, data compiled by Bloomberg show.
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