India Stocks Drop to Two-Week Low, Led by Maruti Suzuki, Larsen
Feb. 24 (Bloomberg) -- Indian stocks fell, dragging the benchmark index to a two-week low, on concern surging oil prices will fan inflation and a weekly report on food prices today will show rising costs for consumers.
Maruti Suzuki India Ltd., the biggest carmaker, plunged the most in three weeks. An index of wholesale farm-product prices including milk and lentils jumped 11.1 percent, commerce ministry data showed last week. Oil surged to the highest in almost 2 1/2 years in London as Libya's violent uprising cut supplies from Africa's third-biggest producer. Larsen & Toubro Ltd., the largest engineering company, slid 2 percent.
The Bombay Stock Exchange Sensitive Index, or Sensex, lost 226.4, or 1.3 percent, to 17,951.93 at 11 a.m. in Mumbai, the lowest since Feb. 11. The gauge has lost 6.3 percent since the central bank increased interest rates on Jan. 25 and raised its inflation estimate. The bank urged the government to cut subsidies to curb consumer demand, in its budget due on Feb. 28.
"The rise in crude oil is adding to bearish sentiment," said Suraj Saraogi, managing director at Keynote Capital Ltd., a Mumbai brokerage. "Investors would like to wait and watch. All eyes are on the budget now for any policy action."
The S&P CNX Nifty Index on the National Stock Exchange dropped 1.4 percent to 5,360.8. The BSE 200 Index retreated 1.4 percent to 2,199.7.
The Sensex has lost 13 percent this year, making it the world's fourth-worst performing benchmark index on concern government measures to quell inflation will hurt economic growth. The gauge has slumped 15 percent from a Nov. 5 record.
Companies on the measure are valued at an average 16.9 times estimated earnings, down from last year's high of about 21.5 times in March, according to data compiled by Bloomberg. Last year, India's gauge climbed 17 percent, adding to the 81 percent surge in 2009.
Maruti Suzuki sank 2.5 percent to 1,163.25 rupees, heading for its steepest decline since Feb. 4. Larsen & Toubro decreased 2 percent to 1,568.45 rupees.
Central bank governor Duvvuri Subbarao last month increased interest rates for the seventh time since March to curb inflation he expects to accelerate to a 7 percent rate by March 31. That's up from an earlier assessment of 5.5 percent. The central bank is aiming for an inflation rate of 4 percent to 4.5 percent.
Rising oil prices due to the Middle East crisis is a concern that Indian equities have not fully priced in yet, Sunil Singhania, head of equities at Reliance Capital Asset Management Ltd., India's biggest money manager, said Feb. 22.
Higher fuel prices push up food costs by boosting transport rates. That will worsen the "crazy jumble" of items including erratic weather patterns and underproduction of staple foods due to rising affluence that are pushing up prices in developing Asia, Mark Matthews, a Singapore-based strategist at Macquarie Group Ltd., said in a Bloomberg Television interview yesterday.
Mahindra & Mahindra Ltd., the largest maker of sport- utility vehicles and tractors, lost 1.7 percent to 629.45 rupees. ICICI Bank Ltd., the country's second-biggest lender, decreased 0.8 percent to 998.55 rupees, poised for its lowest close since Feb. 10.
Hero Honda Motors Ltd., the biggest motorcycle maker, climbed 1.7 percent to 1,497.05 rupees. The company's parent received approval from the Foreign Investment Promotion Board to raise 45 billion rupees from overseas investors, the Economic Times reported, without saying where it got the information. The funds will help the parent to buy a 26 percent stake in Hero Honda that Japan's Honda Motor Co. owns, the report said.
Overseas investors bought a net 924 million rupees ($20.5 million) of Indian equities on Feb. 22, paring total outflow from equities this year to 66.1 billion rupees, according to data on the website of the Securities and Exchange Board of India.
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