Indian (SENSEX) stocks tumbled the most in Asia after erroneous orders led to a plunge and halt in trading on the S&P CNX Nifty Index that briefly erased about $58 billion in value.
The Nifty slid 0.7 percent to 5,746.65 at close in Mumbai. Trading in the index was halted at 9:49 a.m. local time for 15 minutes after the gauge plunged as much as 16 percent. The BSE India Sensitive Index, or Sensex, lost 0.6 percent to 18,938.46 from its highest level since July 2011. Business at the BSE Ltd. was unaffected, Asia’s oldest bourse said in a statement. Reliance Industries Ltd. (RIL), owner of the world’s largest refining complex, and Housing Development Finance Corp. (HDFC), the country’s biggest mortgage lender, both tumbled as much as 20 percent.
“Erroneous orders would impact investor confidence,” said Daphne Roth, Singapore-based head of Asian equity research at ABN Amro Private Banking, which oversees about $207 billion. “However, investors would still ultimately look to future reforms, not just related to the bourse but also to the economy. The crash definitely hurts as there has been a lot of foreign inflows in the last two months.”
The National Stock Exchange, the nation’s largest bourse, controls more than 90 percent of India’s $28 billion equity derivatives market and handles 75 percent of the stock trades. The plunge, the biggest in more than two years, overshadowed government approval yesterday of proposals allowing overseas companies to take stakes in insurance firms and pension funds.
Ministers approved yesterday proposals allowing overseas companies to hold as much as 49 percent in insurance firms, and for the first time permitting foreign investment in pension funds, as the Congress Party-led government pushes ahead with the biggest opening of the economy since 2004.
Yesterday’s cabinet decision extends Prime Minister Manmohan Singh’s policy push that began last month when the government lowered fuel subsidies, opened retailing and airlines to foreigners and reduced a tax on local companies’ overseas borrowings to 5 percent from 20 percent.
Aviva Plc (AV/), Allianz SE and ING Groep NV (INGA) are among global insurers that will be able to further invest in their Indian ventures if lawmakers approve the proposals when parliament resumes next month. The votes may provide the first test of Singh’s ability to drum up the support among regional powerbrokers that his minority administration will need to pass legislation.
Singh’s widening embrace of foreign investment has been spurred by an economy growing close to its slowest pace in three years and warnings that India’s credit rating may be downgraded to junk status amid stalled policy making. The Sensex has gained 5.1 percent since Singh unveiled the measures.
“There’s skepticism the government may not be able to pass the insurance and pension bills in Parliament,” Rikesh Parikh, vice president of equities at Motilal Oswal Securities Ltd., said in a phone interview today. “Investors are turning cautious after the sharp rally.”
The Sensex has increased 23 percent this year as overseas funds bought a net $16.5 billion of equities, the most among 10 Asian markets tracked by Bloomberg, which excludes China. The gauge trades at 15 times estimated earnings, the most expensive since March 30. The ratio is still below the gauge’s three-year average of 16.3, according to data compiled by Bloomberg.
Nifty (NIFTY)’s October futures settled at 5,776.55. The BSE-200 Index slid 0.7 percent to 2,330.78. The National Stock Exchange of India and the BSE traded 1.4 billion shares yesterday, 51 percent more than the 12-month daily average.
Infosys Ltd. (INFY:US), the second biggest software exporter, slumped to a four-week low. It fell 1.8 percent to 2,526.85 rupees. ICICI Bank Ltd. (IBN:US), the third-biggest lender, fell 1.5 percent to 1,066.7 rupees, the steepest decline in two weeks.
HDFC dropped 5 percent to 749.95 rupees after Carlyle Group sold its stake in the company. Reliance climbed 0.6 percent to 857.8 rupees, rebounding from an intra-day loss of as much as 20 percent.
Overseas investors bought a net $187.5 million of Indian stocks yesterday, a ninth straight day of net purchases, according to data from the nation’s market regulator.
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