Bloomberg News

Indian Stocks Fall Most in a Week Even as RBI Reduces Rates

January 29, 2013

India’s benchmark stock index fell by the most in a week even after the central bank cut interest rates for the first time since April. Telecommunication and energy companies led the declines.

The BSE India Sensitive Index, or Sensex, slid 0.6 percent to 19,990.90 at the close, the steepest drop since Jan. 22. Bharti Airtel Ltd. (BHARTI), the nation’s largest mobile-phone operator, sank 2.2 percent, the most since Dec. 21. Reliance Industries Ltd. (RIL), the owner the world’s largest oil-refining complex, fell for the fourth day, losing 1.6 percent.

Stocks fell even as the Reserve Bank of India cut its key repurchase rate by 25 basis points to 7.75 percent, an outcome predicted by 30 of 35 analysts in a Bloomberg survey, and pared the cash reserve ratio to 4 percent from 4.25 percent. The Sensex, which closed at a two-year high of 20,103.53 on Jan. 25, trades at 15.9 times estimated earnings, the highest level since February last year, data compiled by Bloomberg show.

“As we move toward multi-year highs on the index, there would be a tendency to sell,” Aneesh Srivastava, who oversees $475 million as the chief investment officer at Mumbai-based IDBI Federal Life Insurance Co., said by phone. “The policy event is behind us, without really throwing any surprises. The 25-basis point cut was priced in.”

The Sensex has advanced 2.9 percent in 2013, extending last year’s 26-percent jump, as foreign funds bought Indian shares amid government efforts to curb subsidies, allow higher foreign investment in the retail and airline sectors and speed up infrastructure projects in a bid to revive economic growth.

Foreigners bought $24.5 billion of local shares in 2012, the most among 10 Asian markets tracked by Bloomberg. The flows helped the Sensex to its biggest annual advance in three years. Offshore funds have plowed $3.5 billion into Indian stocks this month, surpassing the previous January record of $2.18 billion set last year.

Telecom Stocks

Bharti declined 2.2 percent to 349.5 rupees. Reliance Communications Ltd., India’s (SENSEX) third-largest mobile-phone company by subscribers, sank 3.9 percent to 81 rupees. The stock, which is not part of the Sensex, was among the worst performers on the MSCI Emerging Markets Index (MXEF) today.

Reliance Industries dropped 1.6 percent to 882.85 rupees, the biggest decline since Oct. 8. The company’s KG-D6 and NEC-25 fields are among 14 oil and gas blocks that have been declared “no-go” areas by India’s defense ministry, barring any exploration or production activity, Press Trust of India reported yesterday, citing people it didn’t identify.

Lenders Drop

HDFC Bank Ltd. (HDFCB), the nation’s second-largest private lender, slumped 2.7 percent to 652.45 rupees, the most since June 1. State Bank of India (SBIN), the largest lender, slid 1.2 percent to 2,462.45 rupees. Tata Motors Ltd. (TTMT), the owner of Jaguar Land Rover, fell 1.4 percent to 304.25 rupees, ending a two-day rally. Motorcycle maker Bajaj Auto Ltd. (BJAUT) tumbled 2.6 percent to 2,031.85 rupees, the largest drop since Aug. 29.

India became the first major Asian economy to cut funding costs in 2013, after inflation moderated to a three-year low of 7.18 percent in December. The reading is still the highest in the so-called BRIC group of major emerging nations. The RBI lowered its inflation estimate to 6.8 percent from 7.5 percent and said price gains are likely to stay around current levels going into 2013-2014.

“The message that we are trying to give is that as much as there is some space, it’s going to be quite limited and we are going to use it with a lot of judgment, on both the timing and the quantum,” Governor Duvvuri Subbarao said at a meeting today in Mumbai. The RBI cut its growth forecast for the year to March to 5.5 percent from 5.8 percent. That would be the slowest since 2002-2003.

‘Hawkish Stance’

“The policy had nothing dramatically positive for the stock market,” U.R. Bhat, managing director of Dalton Capital Advisors India Pvt. in Mumbai, said by phone. “RBI’s stance is relatively hawkish and it will not be able to bring down key interest rates until inflation comes under control.”

Sterlite Industries (India) Ltd. (STLT), the nation’s top copper producer, had its first drop in three days after reporting group net income of 11.9 billion rupees ($222 million) for the quarter ended December, which missed the 13.9 billion-rupee median of analysts’ estimates in a Bloomberg survey. The stock lost 0.7 percent to 113.25 rupees.

Three out of 14, or 21 percent, of Sensex companies that have reported December-quarter earnings have missed forecasts, compared with 40 percent in the previous two quarters, data compiled by Bloomberg show.

The S&P CNX Nifty Index (NIFTY) on the National Stock Exchange of India fell 0.4 percent to 6,049.90 while its January futures settled at 6,049.40. India VIX, which gauges the cost of protection against losses in the Nifty, slid 4.6 percent, the most in three weeks, to 14.47, data compiled by Bloomberg show.

To contact the reporter on this story: Shikhar Balwani in Mumbai at sbalwani@bloomberg.net

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


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