India's Sensex Drops as Japan Nuclear Leak Risk Spooks Investors
March 15 (Bloomberg) -- India's benchmark stock index fell the most in a week as Japan warned that risks are increasing of further radiation leaks from a nuclear power plant damaged by the nation's biggest earthquake.
Tata Power Co., the nation's biggest non-state electricity generator, sank 2.9 percent, its steepest slide in more than five weeks. Japanese Prime Minister Naoto Kan today said the government is doing all it can to contain radioactive leaks. The nation's investment into India may be hurt in the aftermath of the temblor, Chakravarthy Rangarajan, head of the Indian premier's Economic Advisory Council, said. Maruti Suzuki India Ltd., a unit of Japan's Suzuki Motor Co., lost 2.6 percent.
"One doesn't know the extent of what's going to happen, what is the fallout and how much damage this is going to cause," said David Pezarkar, head of equities at Daiwa Asset Management (India) Pvt. in Mumbai. "Because of all this uncertainty, markets are likely to remain weak."
The Bombay Stock Exchange's Sensitive Index, or Sensex, lost 235.12, or 1.3 percent, to 18,204.36 at 11:44 a.m. in Mumbai, poised for its steepest decline since Feb. 7. The S&P CNX Nifty Index on the National Stock Exchange dropped 1.3 percent to 5,459.25, while its March futures traded at 5,466. The BSE 200 Index retreated 1.3 percent to 2,235.33.
Tata Power slid 2.9 percent to 1,214 rupees, on course for its steepest decline since Feb. 4. Areva T&D India Ltd., a power transmission and distribution company, tumbled 4.9 percent to 232 rupees, set for its lowest close since May 2009.
Manmohan Singh, who risked his premiership to secure India's access to atomic reactors and supplies, faces opposition to his $175 billion investment plan after Japan's strongest earthquake triggered the nuclear accident. Inspectors will review safety at India's 20 nuclear reactors, Singh told parliament yesterday, two of which are the same design as those in Japan that were at risk of a meltdown.
Asian stocks slumped, dragging the MSCI Asia Pacific Index down by more than 10 percent from its January peak. Japan's Nikkei 225 Stock Average plunged 10 percent, entering what some investors call a bear market after falling more than 20 percent from its high this year on Feb. 21.
The Sensex's 11 percent drop this year makes it Asia's worst performer after Japan among the region's largest stock markets amid concern government measures to quell inflation will hurt economic growth. The gauge has slumped 13 percent from a Nov. 5 record.
"Global sentiment will hurt Indian stocks," said Rajat Jain, chief investment officer at Principal Pnb Asset Management Co. in Mumbai, who oversees the equivalent of $1.3 billion in assets. He said shares of Indian automakers with Japanese parents may decline.
Maruti dropped 2.6 percent to 1,224 rupees. Hero Honda Motors Ltd., India's biggest motorcycle maker, lost 0.9 percent to 1,518.05 rupees, while its March futures traded at 1,513.40 rupees.
Trade between Indian and Japan, and investment from the world's third-largest economy may be hurt "to some extent," Rangarajan said in New Delhi today.
Companies on the Sensex are valued at an average 17.1 times estimated earnings, down from last year's high of about 21.5 times in March, according to data compiled by Bloomberg. Reserve Bank of India Governor Duvvuri Subbarao on March 17 will decide whether to raise interest rates for the eighth time in a year to curb the pace of price increases.
Overseas investors sold a net 2.2 billion rupees ($48 million) of Indian equities on March 11, increasing their outflow from stocks this year to 77.7 billion rupees, according to data on the website of the Securities and Exchange Board of India.
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