Indian stocks declined, with the benchmark gauge capping its third weekly loss in four, as investors weighed the prospects for a US interest-rate increase next month.
Lupin plunged the most since 2008 after the drugmaker reduced its revenue forecast. ICICI Bank Ltd, the nation’s biggest private lender, fell the most in two weeks. Reliance Industries (RIL), owner of the world’s largest refining complex, slid to a three-month low. ITC climbed after its revenue beat estimates and the cigarette maker said it would issue free shares.
The S&P BSE Sensex dropped 0.4%, or 97.82 points, to 25,301.90 at the close in Mumbai. The gauge retreated 0.7% this week amid concern higher borrowing costs in the US would temper flows to emerging markets. Foreigners have bought $271mn of local shares this month, compared with $585mn in April and $4.1bn in March, which was the biggest inflow in three years, data compiled by Bloomberg show.
“The probability that the Fed will hike in June is very high,” Michael Preiss, executive director for client investments at Taurus Wealth Advisors Pte., a wealth management firm in Singapore, said in an interview to Bloomberg TV India. “The market is now trying to adjust to the new reality that rates could go two times in the near future.”
Some $900bn was wiped of the value of global equities over the last three days as prospects for a Fed rate increase in June, spurred by comments from Fed officials and minutes of the last policy meeting. Fed Funds futures put the odds of a move next month at 28%, up from 4% a week ago.
Lupin plunged 9.1%, the most since November 2008. The company told analysts in a conference call after the market hours on Thursday that it expects revenue of $3.5bn in the year ending March 2018, less than the $5bn estimated previously. The drugmaker is “unlikely to achieve even the reduced revenue target of $3.5bn,” Fathima Khan, an analyst with Khambatta Securities, said in an interview.
ICICI Bank lost 2.4%, extending this year’s loss to 16%. RIL slid 1.7% to its lowest level since February 18. So far, nine out of 17 Sensex companies that have posted March quarter (Q4) results have so far beaten or matched estimates.
Foreign investors bought $51mn of local stocks on May 19, taking this year’s inflows to $2.2bn.
Meanwhile the rupee yesterday weakened for the seventh consecutive session against the US dollar, on concerns of slowing dollar inflows. Fall in local equity markets for the third consecutive session also dampened investor sentiment.
The home currency closed at 67.45—a level last seen on March 2, down 0.11% from its previous close of 67.37. The rupee opened at 67.42 per US dollar and touched a low of 67.50, a level last seen on March 9.
Foreign portfolio investors (FPIs) have been net sellers so far this month. FPIs have sold $270.87mn worth of shares and bonds this month. In March and April, they bought $4.33bn and $1.13bn, respectively.
Traders are cautious as they expect foreign institutional investors may sell more in Indian markets if the US Federal Reserve raises interest rates in the near term. The next Fed policy meet is on 15 June.
India’s 10-year bond yield closed at 7.478%—a level last seen on 30 March, as compared with its Thursday’s close of 7.471%.
So far this year, the rupee has weakened 2%, while foreign institutional investors have bought $2.02bn from the local equity market and sold $681mn in debt markets.