Automakers and consumer companies led losses in Indian equities as investors continued to grapple with the fallout of the government’s recall of high-value currency notes and concern mounted over capital outflows from local assets after Donald Trump’s unexpected victory.
Tata Motors, owner of Jaguar Land Rover, sent a gauge of automobile companies to a four-month low. The S&P BSE Fast Moving Consumer Goods Index fell to a four-month low, while an index of consumer durables suffered its biggest loss in 14 months. State Bank of India jumped 1.9% as trading resumed after Monday’s public holiday.
“Consumer-discretionary companies are taking a hit as people are deferring purchases because of the cash crunch, while banks are up because of the huge amounts of deposits that are coming in,” Chinmay Madgulkar, an analyst at Taurus Asset Management Co in Mumbai, said by phone.
The fallout of Modi’s clampdown on 500 and 1,000 rupee ($15) notes on November 8 has coincided with turmoil in global markets in the wake of Trump’s election success. The rupee led losses in Asia yesterday as speculation grew Trump’s policies will curb trade and spur quicker interest-rate increases by the Federal Reserve. Futures indicate a 92% chance borrowing costs will be raised at the December policy meeting.
Overseas investors pulled a net $324mn from Indian shares last week through Thursday, and foreign holdings of bonds dropped by Rs14.2bn ($210mn) on Friday, the most since October 13, data compiled by Bloomberg show.
The Sensex has climbed 0.7% this year and trades at 15.5 times projected 12-month earnings, compared with a five- year average of 14.5 times. Vedanta plunged 9% after the stock was lowered by Credit Suisse Group to underperform from neutral following a rally of almost 200% this year. Corp Bank soared 13% after reporting higher profit in the second quarter. Tata Motors tumbled 10%, the worst performer on the Sensex, while Asian Paints slid 7.4%, the most since August 2013.
Meanwhile, the rupee led losses in Asia as Indian markets opened after Monday’s public holiday, with rising odds of a Federal Reserve interest-rate increase triggering concern outflows from local assets will
accelerate.
The currency dropped 0.7% to close at 67.7425 per dollar in Mumbai, prices from local banks compiled by Bloomberg show. It weakened to 67.8250 earlier, the lowest level since June 29. State-run banks sold dollars, probably on behalf of the Reserve Bank of India, as the rupee extended losses, two Mumbai-based traders said, asking not to be identified.
Odds that the Fed will tighten policy at its December meeting have risen to 92% from 68% at the start of this month amid speculation US President-elect Donald Trump’s plans to increase spending will push up inflation. Concern he will take a more protectionist approach to trade has also weighed on emerging markets, with the rupee sinking 0.9% on Friday.
“The rising probability of a December Fed rate increase is weighing on the minds of the investors,” said Sugandha Sachdeva, associate vice president for currency research at Religare Commodities Ltd in Noida, near New Delhi. “The rupee also breached a key support of 67.20 to the dollar in the last session, which is adding to the move.”
Sachdeva said she sees the currency, which has lost 1.9% in three days, sliding to 68.20 over the course of this month. RBI spokeswoman Alpana Killawala wasn’t immediately reachable after two calls made to her office phone.