By -
Jun 16, 2014
India’s benchmark stock index fell
for a second day on concern a surge in global oil prices will
increase inflation and limit the central bank’s scope to lower
borrowing costs.
Engineering company Larsen & Toubro Ltd. (LT) dropped the most in two months, sending a gauge of capital goods producers to a two-week low. Coal India Ltd. (COAL), the world’s biggest producer of the fuel, headed for its biggest four-day loss in five months. The rupee weakened beyond 60 per dollar for the first time in more than a month.
The S&P BSE Sensex (SENSEX) lost 0.2 percent to 25,177.7 at 10:53 a.m. in Mumbai. Higher energy costs may add to price pressures in a nation that buys about 80 percent of its oil from abroad, undermining Prime Minister Narendra Modi’s efforts to restrict inflation and revive growth from near a decade-low. Data due today will show wholesale prices climbed 5.34 percent in May, following a 5.2 percent gain in April, according to the median forecast in a Bloomberg survey of analysts.
“Inflation may spike due to oil, which will put pressure on interest rate-sensitive and cyclical stocks,” Alex Mathews, head of research at Geojit BNP Paribas Financial Services (GBNP), said by telephone from Kerala. “The market is likely to consolidate this week as investors wait for cues from the federal budget and watch the progress of the monsoon.”
Oil traded in New York climbed for a fourth day and Brent crude rose on concern that mounting violence in Iraq threatens to disrupt supplies. The spike comes amid forecast by India’s weather office that monsoon rains from June to September may be below normal this season, threatening Modi’s plans to narrow the nation’s fiscal deficit as the government prepares to unveil its first budget next month.
The Reserve Bank of India signaled this month it could ease monetary policy if inflation slows faster than anticipated.
The Sensex trades at 15.5 times projected 12-month profits, near the most expensive level in three years, and compares with the MSCI Emerging Markets Index’s multiple of 11.
Foreigners have bought a net $9.7 billion of local shares this year, the most among eight Asian markets tracked by Bloomberg, on optimism the new government will boost efforts to revive economic growth.
To contact the reporter on this story: Santanu Chakraborty in Mumbai at schakrabor11@bloomberg.net
To contact the editors responsible for this story: Michael Patterson at mpatterson10@bloomberg.net Ravil Shirodkar
Engineering company Larsen & Toubro Ltd. (LT) dropped the most in two months, sending a gauge of capital goods producers to a two-week low. Coal India Ltd. (COAL), the world’s biggest producer of the fuel, headed for its biggest four-day loss in five months. The rupee weakened beyond 60 per dollar for the first time in more than a month.
The S&P BSE Sensex (SENSEX) lost 0.2 percent to 25,177.7 at 10:53 a.m. in Mumbai. Higher energy costs may add to price pressures in a nation that buys about 80 percent of its oil from abroad, undermining Prime Minister Narendra Modi’s efforts to restrict inflation and revive growth from near a decade-low. Data due today will show wholesale prices climbed 5.34 percent in May, following a 5.2 percent gain in April, according to the median forecast in a Bloomberg survey of analysts.
“Inflation may spike due to oil, which will put pressure on interest rate-sensitive and cyclical stocks,” Alex Mathews, head of research at Geojit BNP Paribas Financial Services (GBNP), said by telephone from Kerala. “The market is likely to consolidate this week as investors wait for cues from the federal budget and watch the progress of the monsoon.”
Oil traded in New York climbed for a fourth day and Brent crude rose on concern that mounting violence in Iraq threatens to disrupt supplies. The spike comes amid forecast by India’s weather office that monsoon rains from June to September may be below normal this season, threatening Modi’s plans to narrow the nation’s fiscal deficit as the government prepares to unveil its first budget next month.
The Reserve Bank of India signaled this month it could ease monetary policy if inflation slows faster than anticipated.
The Sensex trades at 15.5 times projected 12-month profits, near the most expensive level in three years, and compares with the MSCI Emerging Markets Index’s multiple of 11.
Foreigners have bought a net $9.7 billion of local shares this year, the most among eight Asian markets tracked by Bloomberg, on optimism the new government will boost efforts to revive economic growth.
To contact the reporter on this story: Santanu Chakraborty in Mumbai at schakrabor11@bloomberg.net
To contact the editors responsible for this story: Michael Patterson at mpatterson10@bloomberg.net Ravil Shirodkar
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