Mumbai: Most Indian stocks dropped after inflation unexpectedly quickened to a six-month high, stoking concern the central bank may maintain liquidity-tightening measures at its policy meeting this week.

State Bank of India (SBI), the nation’s biggest lender, erased an intra-day gain of 2.6%. Iron-ore miner Sesa Goa Ltd slid 3.8%. Tata Consultancy Services Ltd (TCS), the nation’s largest software services exporter, declined 2.6% after the rupee climbed to a one-month high.

Shares of Ranbaxy Laboratories Ltd dropped 30.27% to 318.85, marking their lowest close in a month after the US Food and Drug Administration (FDA) issued an import alert against the company’s Mohali plant. The ruling also triggered brokerage downgrades.

Three stocks fell for every two that rose on the S&P BSE Sensex, which added 0.05%, or 9.71 points, to 19,742.47 at the close. The S&P BSE Bankex index rose 1.86% to be the biggest gainer, while the S&P BSE Healthcare index lost 2.47% to be the biggest loser.

The Sensex gained as much as 1.8% earlier after former treasury secretary Lawrence Summers pulled out from the race to be Federal Reserve chairman before a meeting starting on Tuesday, at which the central bank is forecast to cut monthly stimulus. New Reserve Bank of India (RBI) governor Raghuram Rajan is due to make his first interest-rate decision 20 September.

“Inflation numbers have put to rest any hope one had of a monetary easing this week," Kaushik Dani, a fund manager with Peerless Mutual Fund, which has about $725 million in assets, said by phone. “The market will be guided by the Fed meeting.

State Bank lost 0.9% to 1,646.35. Sesa Goa tumbled 3.8% to 176.85. Tata Steel Ltd, India’s biggest producer, decreased 2.3% to 291.6.

Bharat Heavy Electricals Ltd (Bhel), the nation’s biggest maker of power equipment, plunged 5% to 135.65, the steepest drop since 27 August.

Rupee rises

TCS dropped 2.6% to 1,902.55, paring this year’s advance to 52%. Infosys Ltd, the second-largest software exporter, lost 1.1% to 2,993.4, a fourth day of fall.

The rupee strengthened 1% to 62.8450 a dollar.

India’s wholesale-price index rose 6.1% from a year earlier, compared with July’s 5.79% climb, official data showed, as the rupee’s slide stoked import costs. The median estimate of 25 analysts in a Bloomberg survey was for a 5.7% climb. Every 10% decline in the rupee adds as much as 80 basis points to wholesale inflation, according to Nomura Holdings Inc.

A Bloomberg Global Poll last week showed Summers would cut stimulus more than current Fed vice chairman Janet Yellen, who was his rival to replace chairman Ben Bernanke when his term ends in January. The central bank will probably trim its monthly bond-buying program by $10 billion to $75 billion this week, a survey of economists showed this month.

Cash supply

Rajan, who took charge 4 September, inherited interest-rate increases from July aimed at shoring up the rupee. He’s pledged to contain inflation expectations and stepped up efforts to bolster foreign-exchange reserves, prompting a climb in the rupee that cut its 2013 drop versus the dollar to 12.5%.

The RBI raised two interest rates in July to boost shorter term funding costs and capped cash injections into the banking system, seeking to curb the supply of rupees.

The benchmark repurchase rate was left unchanged after cuts earlier in 2013. Rajan will keep it at 7.25% at the 20 September, Standard Chartered Plc and Morgan Stanley said.

The Sensex has increased 1.6% this year in local currency terms and is valued at 13.9 times projected 12-month earnings, compared with the five-year average of 14.1 times, data compiled by Bloomberg show. It has lost 11% this year in dollar terms.

The CNX Nifty on the National Stock Exchange decreased 0.2%, or 10.05 points, to 5,840.55. India VIX, which gauges the cost of protection against losses in the Nifty, gained 1.9%.

Overseas investors bought a net $150 million of domestic shares on 12 September, data from the regulator show. That boosted this year’s net inflow to $12.4 billion, the second-highest among 10 Asian markets tracked by Bloomberg. Foreigners pulled $3.7 billion from local equities in the three months to 31 August as capital fled emerging markets. Bloomberg

Bloomberg’s Manish Modi in New Delhi and Santanu Chakraborty in Mumbai,and Mint’s Ravindra Sonavane contributed to this story.

Close