Indian stocks declined the most in about two months, led by lenders, after the central bank cut its benchmark interest rate as forecast by economists.
State Bank of India and ICICI Bank, the country’s biggest lenders, were among the worst performers on the S&P BSE Sensex. Adani Ports & Special Economic Zone fell the most in about two months. Tata Motors, owner of Jaguar Land Rover, and Bharti Airtel, the nation’s top mobile-phone operator, tumbled about 5% each.
The Sensex plunged 2% at the close in Mumbai, the steepest decline since February 11. Governor Raghuram Rajan reduced the repurchase rate by 25 basis points to 6.5%, a five- year low, said the central bank would look for more room to ease as it watches monsoon rains. The decision, predicted by 36 of 42 economists in a Bloomberg survey, came as Asian stocks slumped to a five-week low after a deepening slump in crude oil sapped demand for riskier assets.
“A 25-basis point cut was in the price,” Aneesh Srivastava, who manages $700mn as chief investment officer at IDBI Federal Life Insurance Co, said by phone. “The market is also reacting to global cues.”
Along with slowing inflation, Prime Minister Narendra Modi’s move to narrow the budget deficit in February opened room for Rajan to join Indonesia and Europe in easing policy. Water reservoir levels, global oil prices and a planned pay raise for civil servants will decide if further easing is possible. The RBI’s stance will remain accommodative, Rajan said.
ICICI Bank tumbled 5.5%, the most since February 1. State Bank dropped to its lowest close since March 14. The stocks were the worst performers on the 10-member S&P BSE India Bankex, which lost 3.2%, ending five days of advances.
Adani Ports plunged 6.7%, the most since February 11. Tata Motors declined 4.6%, while Bharti Airtel tumbled 5.2%. The benchmark gauge of Indian option costs rose to a one- month high. The India VIX Index increased 2.2% to 17.83 at the close, following an 18% slump in March. The NSE Nifty 50 Index retreated 2% to 7,603.20.
“With the RBI event over, stocks will pause after the March madness,” Anita Gandhi, a director at Arihant Capital Markets in Mumbai, said by phone. “The outlook on corporate earnings is not that exciting.”
The Sensex last month capped its best month since January 2012, as a government pledge to further pare the fiscal gap and speculation of an interest-rate reduction spurred capital inflows. Company profits remain on the opposite trajectory, falling in four of the last five quarters in the worst run since the financial crisis. Analysts estimate an earnings growth of 3.3% in the March-quarter reporting season, which begins next week.
The Indian stock gauge has retreated 4.7% this year and trades at 15.2 times 12-month projected profits versus 11.5 for the MSCI Emerging Markets Index. 
Meanwhile the rupee closed 0.4% lower against the US dollar yesterday, its maximum fall in three weeks, after local equity markets fell over 500 points.
The Indian currency closed at 66.46, lower from its previous close of 66.21. The rupee opened at 66.27 and touched a high of 66.07, a level last seen on 19 November 2015. The currency touched a low of 66.51.
India’s benchmark Sensex fell 2.03%, or 516.06 points, to close at 24,883.59.
In March, foreign institutional investors (FIIs) bought equities worth $4.08bn in the local markets, helping the rally in stock markets.
India’s 10-year bond yield closed at 7.461% as compared with its Monday’s close of 7.415%. The 10-year bond yields opened at 7.413% and touched a low of 7.374%, a level last seen on 20 June 2013.
Reserve Bank of India (RBI) governor Raghuram Rajan cut the benchmark repurchase rate to 6.5% from 6.75% yesterday. That’s the lowest since March 2011.
So far this year, rupee has fallen 0.45%, and FIIs have bought $1.21bn from local equity and sold $738.5mn in debt markets.
Most Asian currencies closed lower. South Korean won was down 0.78%, Malaysian ringgit weakened 0.59%, Singapore dollar declined 0.4%, Indonesian rupiah shed 0.24%, Taiwan dollar fell 0.23%, China offshore was down 0.15%, Philippines peso slid 0.12% and Thai baht slipped 0.11%. However, Japanese yen strengthened 0.77% and China renminbi rose 0.09%.
The dollar index, which measures the US currency’s strength against major currencies, was trading at 94.731, up 0.23% from its previous close of 94.51.