Indian Stocks Fall After Minister Says Rice Yields May Drop

Aug. 19 (Bloomberg) -- India’s benchmark stock index fell to its lowest in more than a month after the nation’s agriculture minister said farm output may decline because of weak monsoon rains.

Mahindra & Mahindra Ltd., India’s largest tractor maker, led the drop after Farm Minister Sharad Pawar today said monsoon-sown rice production may decline by 10 million metric tons this year as a result of drought in a third of the country’s 626 districts. Growers harvested 84.6 million tons of the seasonally planted crop in the year ended June.

“There is uncertainty in the minds of investors how the government will overcome the drought situation,” said A.N. Sridhar, a fund manager at Sahara Asset Management Co. in Mumbai.

The Bombay Stock Exchange’s Sensitive Index, or Sensex, fell 338.77, or 2.25 percent, to 14,696.49 at 12:18 p.m. in Mumbai. The measure has lost 6.2 percent so far this year on monsoon concerns. The S&P CNX Nifty Index on the National Stock Exchange lost 1.5 percent to 4,392.95. The BSE 200 Index declined 1.4 percent to 1,818.45.

Mahindra lost 2.1 percent to 752.9 rupees. Jaiprakash Associates Ltd., the nation’s biggest maker of dams, slid 2.5 percent to 207 rupees.

The monsoon season, which brings about three-quarters of India’s annual rainfall, may be the driest in seven years, the weather bureau said last week. More than a third of the nation’s 626 districts have declared drought, hurting farm output in the world’s second-biggest producer of rice, sugar and wheat.

Rain in the June-September season will be 87 percent of the 50-year average, compared with 93 percent forecast in June, the India Meteorological Department said last week.

Oils Subsidy

Production of oilseeds and sugar cane may also drop, Pawar said, without providing a forecast. Monsoon-sown oilseeds were planted in 15.2 million hectares compared with 16.4 million hectares a year earlier, the farm ministry said.

The government will extend a 15 rupees-a-liter subsidy on imported edible oils until March 2010, Pawar said.

Overseas funds sold a net 9.74 billion rupees ($200.1 million) of Indian stocks on Aug. 17, the Securities & Exchange Board of India said on its Web site. The funds have bought 366.3 billion rupees of Indian stocks this year to date, compared with record net sales of 530 billion rupees for the whole of 2008.

Glenmark Pharmaceuticals Ltd., an Indian pharmaceutical company, fell the most in two months after saying its drug for lung disease wasn’t effective in a patient study. The stock sank 10 percent to 235 rupees.