Mumbai: India’s stocks fell for a fifth day, with the benchmark index completing its longest losing streak in eight months, amid concern rising prices will prompt the central bank to tighten monetary policy this month.
HDFC Bank Ltd, the third-biggest lender, dropped the most in more than 18 months. Hindalco Industries Ltd, the biggest aluminium producer, declined 4.8%, extending its 7.2% slide on 7 January.
“Persistent price gains may require an interest-rate increase this month,” C. Rangarajan, the Prime Minister’s top economic adviser, said in a 7 January interview.
Benchmark inflation accelerated in December from almost a one-year low, a 14 January government report will show, according to the median estimate in a Bloomberg survey of 29 economists.
“It’s the fear of the unknown,” said D.K. Aggarwal, who manages about $100 million as chairman of SMC Wealth Management Services Ltd in New Delhi.
“Investor confidence has been shaken up and they don’t want to take fresh positions.”
The Bombay Stock Exchange’s sensitive index, or Sensex, lost 467.69 points, or 2.4%, to 19,224.12 points, at close in Mumbai.
The gauge has retreated 6.5% since 3 January.
Companies on the measure are valued at an average 18.2 times estimated earnings, compared with a recent peak of 20.1 times on 5 November.
The S&P CNX Nifty Index on the National Stock Exchange dropped 2.4% to 5,762.85 points.
The BSE 200 Index retreated 2.4% to 2,377.13 points.
HDFC Bank sank 5.2% to Rs2,152.25, its steepest decline since July 2009.
Housing Development Finance Corp., India’s biggest mortgage lender, plunged 4.4% to Rs653.6, its biggest slide since 22 July 2009.
Larsen and Toubro Ltd, the largest engineering company, dropped 3.6% to Rs1,780.75. Bharat Heavy Electricals Ltd, the biggest power equipment maker, decreased 4.7% to Rs2,182.1, its sharpest fall since May 2009.
“India is facing the problem of an unstable price regime,” finance minister Pranab Mukherjee said on 8 January.
The Wholesale Price Index probably increased 8.3% from a year earlier, according to the economists surveyed, after gaining 7.48% in the previous month.
The next central bank monetary policy meeting is on 25 January.
Global funds were net sellers of Indian stocks for a second straight day, disposing of Rs214 crore ($47 million) on 6 January, according to data on the website of the market regulator Securities and Exchange Board of India.
“Foreign investors are not committing new money as given the risks there could be better buys elsewhere,” SMC Wealth Management’s Aggarwal said.