Indian Stocks Fall to Eight-Week Low; Metal Shares Lead Decline


By Rajhkumar K Shaaw

Indian stocks fell to the lowest in eight weeks, led by metal producers on lower prices, while financial companies slid as a government adviser said inflation is a concern, fanning speculation lending costs will rise.

Hindalco Industries Ltd., the nation’s biggest aluminum producer, and Sterlite Industries (India) Ltd., the largest copper and zinc producer, dropped the most in three months. ICICI Bank Ltd., the second-largest, retreated to a two-month low after Kaushik Basu, the government’s chief economic adviser, said in New Delhi today inflation is a “source of worry.”

The Bombay Stock Exchange’s Sensitive Index, or Sensex, fell 248.94, or 1.4 percent, to 17137.14, the lowest since March 10. The gauge has declined 2.4 percent this week. The S&P CNX Nifty Index on the National Stock Exchange lost 1.4 percent to 5,148.5. The BSE 200 Index retreated 1.5 percent to 2,179.99.

“The markets are likely to correct by 10 percent to 15 percent in the next three months, even though we remain bullish over the next one year,” said Vikram Kotak, who manages $3.2 billion in Indian equities and bonds as chief investment officer at Birla Sun Life Insurance Co. in Mumbai. “In the short term, I am worried.”

Stocks may fall amid accelerating inflation and the possibility of foreign investors withdrawing funds, he said. Birla Sun is shifting to so-called defensive stocks from growth industries, Kotak said, and he’s also holding about 10 percent of his portfolio in cash after selling some holdings last month on expectations of a “consolidation” in the market.

Hindalco

Hindalco sank 5.8 percent to 162.95 rupees, its steepest decline since Feb. 4. Sterlite Industries dropped 4.1 percent to 775.75 rupees, extending yesterday’s 2.4 percent retreat.

Copper fell to a nine-week low in London on concern about the outlook for demand after manufacturing in China, the world’s largest user, expanded at a slower pace last month.

The metal, used in construction and automobiles, slid as investors doubted the 110 billion euro ($146 billion) aid package for Greece will contain the region’s debt risks. European leaders are scheduled to meet on May 7 to discuss the timeline of parliamentary approval. Aluminum fell 2 percent on the LME.

Zinc, used to rust-free steel, fell as much as 2.1 percent today. Steel Authority of India Ltd., the nation’s second-largest producer, lowered prices of long products from May 1 as demand fell. The stock slipped 3.9 percent to 210.1 rupees.

Lowering Prices

Tata Steel Ltd., the biggest producer of the alloy, plunged 4.8 percent to 577.85 rupees, and JSW Steel Ltd., India’s third- biggest producer, dropped 6.4 percent to 1,144.1 rupees, both falling the most since Jan. 27. “The overall demand for non-ferrous metals will come down in the near term as China withdraws stimulus leading to production cuts and fall in prices,” said Sumeet Singhania, an analyst at Antique Stock Broking Ltd. in Mumbai. “There is pressure on the steel companies to lower prices of long products and by June they may have to lower prices of the flat products as well.”

ICICI Bank lost 2.3 percent to 915.2 rupees, the lowest since March 5. Basu’s comments come after Finance Secretary Ashok Chawla said over the weekend that inflation at current levels is not “socially, economically or politically acceptable.” HDFC Bank Ltd., the third-biggest lender, lost 1.7 percent to 1,937 rupees.

Consumer Prices

India’s benchmark wholesale-price inflation accelerated to 9.9 percent in March, while consumer prices rose 14.86 percent, the highest rate in the Asia-Pacific region, according to data compiled by Bloomberg.

The Sensex has retreated 1.9 percent this year following an 81 percent rally in 2009. Shares have faltered after the central bank raised interest rates twice and ordered lenders to set aside more cash as reserves in a bid to slow the fastest inflation among the Group of 20 nations and as the credit ratings of Greece, Spain and Portugal were downgraded.

Glenmark Pharmaceuticals gained 0.9 percent to 281.95 rupees after saying its unit signed an agreement with Par Pharmaceutical Cos. to sell Ezetimibe tablets in the U.S.

Overseas investors bought a net 5.39 billion rupees ($121.3 million) of Indian equities on April 30, bringing their total purchases of stocks this year to 305.4 billion rupees, according to the nation’s market regulator.

Inflows from overseas reached a record 834.2 billion rupees in 2009, exceeding the high set two years earlier in domestic currency terms, as the biggest rally in 18 years lured foreign funds. They sold a record 529.9 billion rupees of shares in 2008, triggering a record annual decline.

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