Bloomberg News

Indian Nifty Futures Drop, Signaling Shares May Fall for 8th Day

March 25, 2013

Indian stock-index futures declined, signaling shares may drop for an eighth day, extending a slump to a four-month low.

SGX CNX Nifty Index futures for March delivery fell 0.4 percent to 5,626 at 9:53 a.m. in Singapore. The contract expires on March 28 and Indian markets are closed tomorrow and March 29 for holidays. The underlying CNX Nifty (NIFTY) Index lost 0.3 percent to 5,633.85 yesterday, the lowest close since Nov. 23. The S&P BSE Sensex (SENSEX) index dropped 0.3 percent. The Bank of New York Mellon India ADR Index of U.S.-traded shares slid 0.1 percent.

Indian stocks fell yesterday after a party that supports Prime Minister Manmohan Singh’s coalition government said it would prefer elections in October, prompting concerns polls may be held before schedule. Stocks have slumped since the Dravida Munnetra Kazhagam party, the administration’s biggest ally, quit the coalition on March 19, leaving the government 44 seats short of a majority in the lower house of parliament.

“Domestically, the market has lost its sheen as political uncertainty prevails,” Amar Ambani, head of research at IIFL Ltd., wrote in an e-mail yesterday. “Expect more choppiness on account of the futures and options expiry. A truncated week could keep market participants on the sidelines.”

Policy Changes

The Sensex has retreated 3.8 percent this year amid the weakest economic growth in a decade, the highest inflation among major emerging markets and as more company earnings missed estimates in the three months ended Dec. 31 compared with the previous quarter.

The index trades at 12.6 times projected 12-month profits, compared with the MSCI Emerging Markets Index’s 10.4 times. Its 30-day volatility gauge, a measure of price swings, climbed to the highest level since October yesterday.

Singh’s government has introduced since September a series of policy changes to revive the faltering economy, including opening up aviation and retail industries to foreigners, easing rules on overseas inflows and cutting subsidies. The government estimates India needs more than $75 billion of foreign capital this year and next to fund the current-account deficit, which widened to $22.3 billion, or 5.4 percent of gross domestic product, in the three months to Sept. 30.

Investors’ pessimism on India may be excessive, as the government’s commitment to move ahead with reforms is clear from the calibrated monthly increase in diesel prices and moves to liberalize foreign capital inflows, Deutsche Bank AG analysts Abhay Laijawala and Abhishek Saraf wrote in a note.

Foreigners bought $37.5 million of domestic stocks on March 22, extending this year’s purchases to $9.9 billion, a record for the period, data from the regulator show. Net inflows last year totaled $24.5 billion, the most among 10 Asian markets tracked 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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