By Nick Godt, MarketWatch
MUMBAI (MarketWatch) — Indian stocks succumbed to global selling pressure on Thursday, moving lower as a broad-based tumble in commodities spooked investors.
Also weighing on sentiment, a reading on industrial output for March came in much stronger than forecast, fueling expectations that the Reserve Bank of India will continue to hike interest rates to curb inflation.
The Sensex XX:SENSEX -1.34% fell 249.17 points, or 1.3%, to 18,335.79, with shares of aluminum producer Hindalco Industries Ltd. IN:500440 -4.66% and mining group Sterlite Industries IN:500900 -4.76% both losing nearly 5%.
Metals futures fell further on Thursday, with silver tumbling 7% in broad continuation of last week’s plunge in commodities. Read more on metals.
The S&P/CNX Nifty index XX:NIFTY -1.42% fell 1.4 % to 5,486.15.
The metals sector slumped 3% on the Bombay Stock Exchange, with Hindustan Zinc Ltd. IN:500188 -3.75% off 3.5% and Hindustan Copper Ltd. IN:513599 -1.90% down 1.9%.
Crude-oil futures also fell, as the International Energy Agency warned high oil prices are hurting demand and trimmed its global demand forecast accordingly. Read more on oil.
In India, shares of state-run oil marketing firms such as Indian Oil Corp. Ltd. IN:530965 -0.03% and Bharat Petroleum Corp. Ltd. IN:500547 -0.04% fell slightly. They receive subsidies to sell fuels at a discount and thus help contain inflation.
Industrial output jumps
India’s year-on-year factory output rose 7.3% in March, much faster than the 3.5% growth seen in February, according to government data.
It was almost twice the 3.8% average forecast of economists surveyed by Dow Jones Newswires.
The data showed India’s growth is holding up in spite of the Reserve Bank of India’s sustained campaign to curb inflation by lifting interest rates since March 2010.
The March output data “make it clear that inflation and not growth is the dominant macroeconomic policy concern,” says Leif Lybecker Eskesen, chief economist for India at HSBC. “So, get ready for more rate hikes.”
In March, wholesale inflation jumped to 8.98% from 8.31% the previous month. Last week, the Reserve Bank of India hiked interest rates by a bigger-than-expected 0.5 percentage point, with the central bank saying that curbing inflation was more important than short-term growth.
Separately on Thursday, the Ministry of Commerce and Industry said the year-on-year food-inflation rate fell to 7.70% in the week ended April 30, from 8.63% in the previous week.
The fuel-price index also fell, to a 12.25% year-on-year rate from 13.53% the previous week.
In data due out Monday, wholesale inflation for April is expected to have eased slightly to 8.50%, according to the average forecast of economists surveyed by Dow Jones Newswires.
