Indian stocks tumbled, rupee fell and bonds climbed on concern the global economy may lapse into recession even as accelerating inflation prompts the central bank to extend interest-rate increases. Reliance Industries Ltd. (RIL), India’s most valuable company, sank to its lowest price since April 2009. Infosys Ltd., the second-largest software maker, slid to its lowest in 14 months. The rupee is set for its biggest weekly loss in three months. The yield on the 7.8 percent bonds due April 2021 dropped 15 basis points this week, or 0.15 percentage point, to 8.31 percent, according to the central bank’s trading system. “If there’s going to be some catastrophe in Europe or the U.S. then in the near term all global markets are going to get hit,” Sunil Singhania, head of equities at Reliance Capital Asset Management Ltd., India’s biggest money manager, said in an interview. Reliance Mutual Fund has $23 billion in assets. The Bombay Stock Exchange Sensitive Index, or Sensex, lost 387.31, or 2.2 percent, to 17,305.87, the lowest since June 11, 2010, at the 3:30 p.m. close in Mumbai. The gauge retreated 4.9 percent this week, the most since October 2009. The S&P CNX Nifty Index lost 2.3 percent to 5,211.25. Its August futures settled at 5,220. The BSE 200 Index sank 2.1 percent. Global stocks sank for an eighth day, the longest losing streak since January 2010, and commodities fell, erasing the Standard & Poor’s GSCI index’s gains for the year, on concern the U.S. recovery is faltering. Bonds jumped, driving Treasury 10-year yields to a 10-month low. The U.S. added 85,000 jobs last month, leaving the 9.2 percent unemployment rate unchanged, according to economists surveyed before data today that will cap a week of economic reports that showed the recovery is slowing. ‘Threshold Level’ India may extend rate increases, after the central bank boosted the repurchase rate 11 times since 2010, even as counterparts in Europe, Japan and Switzerland add cash into their economies or seek to stem appreciating exchange rates to support expansion. Price gains are “far above the threshold level” and policy makers need to curb growth to slow price gains, central bank Governor Duvvuri Subbarao said yesterday. Reliance Industries shed 2.5 percent to 792 rupees, its lowest since April 2009. Sterlite Industries (India) Ltd., the largest copper and zinc maker, retreated 6.3 percent to 141.45 rupees. The stock has lost 18 percent in nine days, its longest losing streak in at least two decades. Infosys tumbled 4.4 percent to 2,591.2 rupees. Its August futures settled at 2,600.70 rupees. Tata Consultancy Services Ltd. (TCS) slumped 3.5 percent to 1,057.95 rupees. The two companies get more than 90 percent of their sales from overseas. ‘Dollar Strength’ “Risk-aversion emanating from the U.S. data has led to a very weak domestic stock market and increasing worries about capital inflows,” J. Moses Harding, executive vice president at IndusInd Bank Ltd., said in Mumbai. “The dollar strength we saw yesterday also worked against the rupee.” The rupee weakened 0.4 percent to 44.74 per dollar. It fell to 44.85 earlier, the weakest level since June 29. The Dollar Index, which tracks the U.S. currency against those of six trading partners, rose 1.7 percent yesterday, the most since June, and Treasuries advanced as investors favored the safest assets. It is little changed today. Offshore forwards indicate the rupee will trade at 45.19 to the dollar in three months, compared with expectations for a rate of 44.99 yesterday. India’s 10-year bonds rose, driving yields down this week by the most since June, as investors sought the relative safety of government debt. ‘Powerful Benefit’ Oil fell to the lowest in eight months in New York, set for the biggest weekly decline since May. Futures dropped as much as 4.3 percent after slumping 5.8 percent yesterday. India depends on imports to meet almost 80 percent of energy demand. “The drop in oil is a powerful benefit for India, which has not been factored in this market fall,” Sankaran Naren, chief investment officer for equities at ICICI Prudential Asset Management Co., India’s third-largest money manager, said in an interview to Bloomberg UTV. Naren said he’s using the declines in share prices to reduce cash holdings across funds. The Sensex has lost 16 percent this year, the second-worst performer after Brazil’s Bovespa Index among major indexes in the 10 biggest markets, on concern higher borrowing costs will erode earnings. The decline has almost erased gains of 17.4 percent in 2010. Companies on the gauge trade at 14 times 2012 earnings, down from 21.5 times in March 2010, last year’s high. Earnings reported by nine out of 20 Sensex companies, or 45 percent, have lagged behind analyst estimates for the three months ended June. That compares with 33 percent that missed forecasts in the previous quarter. Overseas investors sold a net 8.01 billion rupees ($180.5 million) of Indian equities on Aug. 3, paring their investment in stocks this year to 93.6 billion rupees, according to data on the website of the regulator. To contact the reporters on this story: Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net; Jeanette Rodrigues in Mumbai at jrodrigues26@bloomberg.net. To contact the editors responsible for this story: Darren Boey at dboey@bloomberg.net; James Regan at jregan19@bloomberg.net.

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