BLBG:Indian Stocks Decline to Two-Year Low on Global Slowdown, Rupee Weakness
Indian stocks sank to their lowest level in two years amid concern a global economic slowdown and a depreciating rupee will lower earnings already threatened by high borrowing costs.
Reliance Industries Ltd. (RIL), India’s most valuable company, declined 3 percent. Infosys Ltd. (INFO), the second-largest software exporter that gets 98 percent of its sales from abroad, fell 2.7 percent. Hindalco Industries Ltd. (HNDL), an aluminum producer that controls U.S.-based Novelis Inc., paced losses among its peers. Lender HDFC Bank Ltd. (HDFCB) plunged 5.4 percent.
The BSE India Sensitive Index (SENSEX), or Sensex, lost 2.9 percent to 15,606.53 at 12:52 p.m. in Mumbai. The gauge is set for its lowest level since Nov. 3, 2009, and is the worst performer in Asia today. The rupee fell to a record yesterday, raising the cost of imported commodities and forcing companies with foreign currency debt dues to repay the loans at higher costs.
“Many companies raised foreign currency borrowings in the hope that interest rates overseas are lower and the rupee will remain stable, but that hasn’t worked out because of the steep depreciation in the rupee,” Sanjeev Prasad, executive director and co-head of institutional equities at Kotak Institutional Equities, told Bloomberg UTV. “Companies will have to pay back more in rupee terms” when the debts mature, he said.
As many as 25 of 28 companies in the BSE-500 Index with foreign currency bonds maturing by March 31, 2013, will face redemption, translating into a 330-billion rupee ($6.3 billion) cash outflow, Edelweiss Securities Ltd. said in a note today.
The Sensex has plunged 23 percent this year as the falling rupee has combined with a slowdown in the $1.7 trillion economy to erode profits. The Reserve Bank of India, which has lifted interest rates 13 times since March 2010 to cool inflation that has exceeded 9 percent for 11 months, in October cut the growth forecast to 7.6 percent from 8 percent.
‘No Silver Lining’
Forty percent of Sensex company earnings trailed estimates in the quarter ended September, compared with 47 percent in the June quarter and 33 percent in March, Bloomberg data show.
“All macroeconomic indicators are looking very bad, be it inflation, economic growth or the fiscal deficit situation,” K.R. Bharat, managing director of Mumbai-based Advent Advisory Services Pvt., told Bloomberg UTV today. “There seems to be no silver lining on the horizon when it comes to Europe or India.”
The S&P CNX Nifty Index on the National Stock Exchange of India Ltd. dropped 2.8 percent to 4,676.7. The BSE 200 Index slid 2.5 percent.
Reliance Industries plunged 3 percent to 771.95 rupees. Infosys tumbled 2.6 percent to 2,653 rupees. The two companies have the biggest weighting on the Sensex.
Metals Soften
Hindalco slid 2.3 percent to 119.15 rupees, extending this year’s decline to 52 percent, the most among Sensex companies, and Sterlite Industries (India) Ltd. (STLT), the biggest copper and zinc producer, dropped 2.2 percent to 102.6 rupees after the London Metal Exchange Index of prices for six base metals fell 2.5 percent yesterday.
Tata Steel Ltd. (TATA), the nation’s biggest producer, shed 2.3 percent to 382.6 rupees. HDFC Bank sank 5.4 percent to 420 rupees. State Bank of India (SBIN), the biggest, slipped 2.4 percent to 1,649.2 rupees.
Overseas investors sold a net 6 billion rupees of Indian stocks on Nov. 21, paring their investment in the shares this year to 13.9 billion rupees, according to data on the website of the Securities and Exchange Board of India.
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
