India Stocks Drop to Lowest in More Than a Year on Rate Concern
By Saikat Chatterjee
July 1 (Bloomberg) -- India's benchmark Sensitive Index fell for a third day to its lowest in more than a year on concern that rising interest rates will hurt profits of banks and property developers.
ICICI Bank Ltd., the nation's second-largest lender, spiraled near a two-year low after raising the rate charged to its best borrowers. DLF Ltd., the nation's biggest developer, plunged to a level last seen 12 months ago.
``The high interest rates are already hurting demand for loans and other consumer goods,'' said R.K. Gupta, who manages the equivalent of about $100 million of stocks at Taurus Asset Management Co. in New Delhi.
The Bombay Stock Exchange's Sensitive Index, or Sensex, fell 499.92, or 3.7 percent, to 12,961.68 at the 3:30 p.m. local time close. This is the index's lowest level since April 5, 2007. The S&P CNX Nifty Index on the National Stock Exchange declined 143.80, or 3.6 percent, to 3,896.75.
Property developers fell after mortgage lenders including Housing Development Finance Corp., the country's largest, and ICICI Bank said they will raise interest rates. ICICI Bank fell 6.5 percent to 589.10, its lowest since Aug. 28, 2006, after raising the rate it charges its best borrowers to 16.5 percent from 15.75 percent. State Bank of India, the nation's biggest, fell 7.8 percent to 1,025.30.
DLF, Unitech
DLF fell 6.9 percent to 369.1 rupees, its lowest since July 4, 2007. Unitech Ltd., India's second-biggest developer, declined 5.6 percent to 161.75 rupees, its lowest since Oct. 11, 2006.
Stocks also fell after India's federal ruling coalition and its communist allies failed to resolve their differences over a nuclear accord with the U.S., threatening the survival of Prime Minister Manmohan Singh's government. The communist parties, whose support is necessary for the ruling coalition to maintain its majority in parliament, have threatened to withdraw their backing if the government proceeds with the accord.
``A mid-term election in India looks quite possible and what is worse is that the country may have to deal with another hung parliament,'' said Taurus Asset Management's Gupta. In addition, ``expectations of quarterly earnings that are due next week do not look very good.''
Housing Development Finance will report on July 16.
Fuel Prices
India's government last month raised retail fuel prices to pare more than $50 billion of revenue losses at refiners, which are forced to sell fuel at below-market price. The fuel price increases contributed to the acceleration in India's inflation to the fastest pace in 13 years.
Oil today rose, extending this year's 48 percent gain, after ABC News reported Israel is increasingly likely to attack Iran this year, starting a conflict that would threaten supplies from the Middle East. Crude oil for August delivery rose as much as 2 percent to $142.73 a barrel in electronic trading on the New York Mercantile Exchange.
The following stocks rose or fell. Tickers are in brackets behind company names:
Jet Airways (India) Ltd. (JETIN IN) dropped 48.40 rupees, or 11 percent, to 380.75, a record low. Indian Oil Corp. (IOCL IN), the nation's largest refiner, yesterday said it will raise the price of jet fuel by 4.4 percent starting today.
JSW Steel Ltd. (JSTL IN) declined 124.7 rupees, or 14 percent, to 775.90. The country's third-biggest producer of the metal plans to spend 60 billion rupees in the year ending March 31 to expand and buy mines in India and overseas to increase raw material supply, the Financial Express reported.
Tata Motors Ltd. (TTMT IN) fell 17.55 rupees, or 4.1 percent, to 408.5. The nation's largest maker of trucks and buses said it will increase the price of commercial vehicles by an average 3 percent to cover higher input costs. The prices will be raised from today, the Mumbai-based company said.
To contact the reporters on this story: Saikat Chatterjee in New Delhi at
schatterjee4@bloomberg.net
Bloomberg.com: India & Pakistan