MUMBAI: India’s Sensitive Index dropped, posting its worst week in seven months, on concern the government may take steps, including a ban on cement exports, to tame inflation in its budget announcement next week.
ICICI Bank Ltd., the nation’s second-largest lender, and Grasim Industries Ltd., India’s third-largest cement maker, had their biggest declines in 11 weeks. The government said today that the key wholesale price inflation rate held near the highest in more than two years.
“We are seeing some pre-budget jitters,” said Amandeep Chopra, who helps manage about $8.6 billion (Rs38,051 crore) of assets at UTI Asset Management Co. in Mumbai. “The government is going to focus on inflation and there is speculation they may ban cement exports and introduce curbs to check prices.”
ITC Ltd., the nation’s biggest cigarette maker, slid on concern the government will impose a value-added tax on cigarettes in its budget announcement next week.
The Bombay Stock Exchange’s Sensitive Index, or Sensex, fell 388.78, or 2.8%, to 13,632.53, the steepest fluctuation among equity markets included in global benchmarks. The index tumbled 5% this week, its biggest weekly decline since the week ended 21 July. All but one of the 30 stocks on the Sensex fell.
The S&P/CNX Nifty Index on the National Stock Exchange lost 101.10, or 2.5% to 3938.90.
ICICI Bank fell Rs40.55, or 4.3%, to Rs907.95, its biggest drop since 11 December 2006. Grasim lost Rs144.75, or 6%, to 2,271.1, its steepest slide since 12 December. ACC Ltd., the nation’s biggest cement maker, dropped Rs47.85, or 5%, to 915.65, its biggest decline since 23 January.
Protecting the Poor
Price increases must be contained to ensure the benefits of economic growth are spread far and wide, Indian President A.P.J. Abdul Kalam told lawmakers today in his inaugural address at the budget session of parliament. “My government will continue to take all necessary steps to ensure that the poor are not adversely affected by inflation.”
The key wholesale price inflation rate fell to 6.63% in the week ended 10 February from 6.73% in the previous week, the commerce ministry said in New Delhi today.
Cement prices have risen by close to 30% since April 2006, according to Sanjay Ladiwala, president of the Cement Dealers’ Association. Indian cement companies have benefited from increased demand for homes and from government spending on infrastructure.
ITC fell Rs7.95, or 4.6%, to Rs166.1. Taxes on cigarettes are at almost 130% of the value of the product, including excise duties, ITC said.
“Fears of a hike in taxes for cigarettes is impacting ITC,” said R.K. Gupta, who manages about $68 million in Indian stocks at New Delhi-based Credit Capital Asset Management Co. “Revenue growth could be hurt with a tax increase.”
Overseas investors sold a net Rs402 million ($9.1 million) worth of stocks on 21 February, according to the latest information on the Securities & Exchange Board of India’s Web site.
Mobile-phone operators: Bharti Airtel Ltd and Reliance Communications Ltd, the nation’s biggest mobile-phone companies, fell after Credit Suisse Group downgraded its ratings on the shares to “under perform” from “neutral,” citing increased competition.
“Vodafone Plc’s attempts to increase its market share in India could trigger a significant competitive response from rivals, which could lead to a deterioration in the return on capital,” Bhuvnesh Singh, a Mumbai-based analyst at Credit Suisse, said in a note to clients today.
Singh cut the price target on Bharti’s shares 3.9% to Rs610 a share and reduced Reliance Communications’ target price 3.8% to Rs385.
Bharti dropped Rs45.85, or 5.7%, to Rs756.1. Reliance Communications declined Rs18.2, or 4%, to Rs432.35.
Atlanta Ltd plunged Rs108.05, or by its 10% limit, to Rs972.7. The founders of Atlanta, an Indian construction company, were barred by the market regulator from buying and selling shares of the company because of trading irregularities after the stock jumped more than six-fold since listing on 25 September.
The company has also been asked not to sell any equity shares or convertible securities, the Securities & Exchange Board of India said in an order sent by e-mail yesterday.
Power Finance Corp rose Rs26.55, or 31%, to Rs111.55. Shares of the Indian state-run lender to electricity utilities began trading today. Power Finance raised Rs9.97 billion selling 117.32 million shares at Rs85 apiece.