Mumbai: India’s stocks dropped for a fifth day, the longest stretch of losses in more than two months, as the country’s industrial production growth unexpectedly slowed and commodity costs climbed.
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Tata Motors Ltd, the country’s biggest truck maker, fell to a two-week low. Factory output in February rose 3.6% from a year ago, the government said on Monday. The median estimate of 30 economists in a Bloomberg survey was for a 5.1% climb. S&P’s GSCI Index of 24 materials climbed 2.1% on 8 April, a seventh day of gains. Oil jumped 4.5% last week.
The Bombay Stock Exchange (BSE) sensitive index, or Sensex, lost 188.91 points, or 1%, to 19,262.54. The S&P CNX Nifty on the National Stock Exchange dropped 1% to 5,785.70 and its April futures settled at 5,798. The BSE-200 Index dropped 0.9% to 2,380.04. The markets are closed on Tuesday for a public holiday.
“A slowdown in growth is a concern,” said Aneesh Srivastava, who oversees about $355 million (Rs 1,480.70 crore today) as chief investment officer at IDBI Federal Life Insurance Co. Ltd. Crude, inflation, interest rates and a lack of government initiatives are responsible for the slowdown. The government is making efforts to put its house in order and the numbers may improve from April.
The Reserve Bank of India has increased rates eight times since March 2010 to ease price pressures from growing consumer demand and oil prices. While the country’s industrial output growth moderated, other data including the purchasing managers’ index, car sales and credit growth have signalled that consumer demand is stoking price risks. Inflation probably accelerated to 8.36% last month, exceeding the central bank’s 8% forecast, according to another Bloomberg survey.
“The priority for RBI is to control inflation,” said IDBI Federal’s Srivastava. He expects the central bank to raise benchmark rates by 25 basis points at its meeting on 3 May. His fund may sell shares of companies vulnerable to an increase in borrowing costs in favour of so-called defensive stocks, such as consumer goods and drug makers, he said.
Tata Motors, the owner of Jaguar Land Rover, dropped 2.84% to Rs 1,219.25. Mahindra and Mahindra Ltd, the country’s largest maker of sport-utility vehicles and tractors, shed 2.43% to Rs 710.05. Bajaj Auto Ltd, the second largest motorcycle maker, lost 2.55% to Rs 1,377.80. Housing Development Finance Corp. Ltd, the biggest mortgage lender, slid 2.69% to Rs 690.10. HDFC Bank Ltd, the third biggest lender, lost 2.37% to Rs 2,296.30.
Marico Ltd, a maker of hair-care products, surged 6.96% to Rs 147.55, the highest close since its debut in May 1996. About two million shares changed hands, more than three times the three-month daily average. Rival Dabur India Ltd added 1.09% to Rs 102.45. ITC Ltd, Asia’s second biggest cigarette company, added 0.46% to Rs 184.95.
Investors tend to get into defensive sectors as interest rates rise and factory production slows, said V.V.L.N Sastry, country head at Firstcall India Equity Advisors Pvt. Ltd. There may be some portfolio switching into consumer stocks, he said.
The Sensex reached a three-month high on 4 April and has declined every trading day since. The measure’s 14-day relative strength index (RSI), which gauges how rapidly prices rise or fall in the specified period, breached 70 that day for the first time since 13 October. Some investors see readings above 70 as a signal to sell. Indicators such as RSI are giving sell signals on the daily charts, said Tejas Shah, a technical analyst with Edelweiss Institutional Equities in Mumbai. The Nifty may decline to 5,700, its 200-day moving average, this week.
The Sensex rallied 9.1% in March, the biggest such gain since September. The gauge has still lost 6.1% of its value this year as concerns that rising borrowing costs will crimp economic expansion. Companies on the benchmark trade at an average 15.2 times estimated earnings, compared with 21.5 times in March 2010, data compiled by Bloomberg show.
Graphic by Paras Jain/Mint
Santanu Chakraborty and Ameya Karve in Mumbai contributed to this story.