Indian (SENSEX) stock-index futures dropped before the expiry of derivatives contracts today, and amid concerns tightening measures by the central bank in the last week will curb economic growth.

SGX CNX Nifty Index futures for July delivery fell 0.6 percent to 5,972 at 10:18 a.m. in Singapore. The July contract expires today. The most-actively traded August contract lost 0.4 percent to 6,011. The underlying CNX Nifty (NIFTY) Index plunged 1.4 percent to 5,990.50 yesterday, the biggest loss since July 3. The S&P BSE Sensex fell 1 percent. The Bank of New York Mellon India ADR Index of U.S.-traded shares slid 0.4 percent.

India’s benchmark indexes slumped yesterday after the Reserve Bank of India tightened banks’ access to cash on July 23 to support a declining rupee, a week after raising two interest rates. The cash squeeze in India is threatening to erode gains from the past year’s pro-growth policies that included interest-rate cuts and steps to allow more foreign holdings in industries and markets.

“We expect the effects of the RBI’s tightening measures to continue, given it’s an expiry day, too,” Surya Narayan Nayak, an analyst at Networth Stock Broking Ltd., said by phone from Mumbai today. “The central bank’s biggest battle is to save the rupee now, and growth can be a casualty in that endeavor.”

The S&P BSE India Bankex index of 13 local lenders plunged 4.6 percent yesterday to the lowest level since Sept. 14, 2012 after the central bank announcement.

Inflation Risks

Asia’s third-largest economy grew 5 percent in the year ended March 31, the least in a decade, while the current-account deficit widened to a record. RBI Governor Duvvuri Subbarao left interest rates unchanged in June, citing persistent inflation risks, after cutting the benchmark repo rate in each of the authority’s three previous meetings. The next policy review is on July 30.

A weaker rupee stokes inflation by raising the cost of India’s imported oil, limiting the central bank’s ability to cut interest rates, threatening to increase costs for companies facing at least $ 20 billion in foreign debt repayments in the coming year.

Corporate bond sales plunged 96 percent in July as yields surged to a one-year high after the central bank’s tightening measures. Borrowing costs for leading companies have climbed back above 10 percent.

Earnings Reports

“The RBI’s seeming determination to squeeze liquidity will almost certainly tighten financial conditions, slow credit growth and amplify the already substantial downside risks to the Indian economy,” Richard Iley, a chief economist at BNP Paribas SA, wrote in a note e-mailed today.

Shares of Hero Motocorp Ltd. (HMCL), India’s largest motorcycle maker, may be active today after the company reported profit dropped 11 percent from the previous year to 5.49 billion rupees ($ 92.8 million) for the quarter ended June 30. That compares with the 5.45 billion-rupee median estimate of 43 analysts in a Bloomberg survey.

Maruti Suzuki India Ltd. (MSIL), the nation’s biggest automaker, may report today quarterly net income of 6.12 billion rupees, compared with 4.24 billion a year earlier, according to the median estimate of 42 analysts in a Bloomberg survey.

Cigarette maker ITC Ltd. (ITC), the biggest company in the Sensex by weight, may say net income rose to 19 billion rupees for the quarter, from 16 billion last year, according to a Bloomberg survey of 30 analysts.

Sterlite Industries (India) Ltd. (STLT), the country’s largest copper producer, may say net income dropped to 10.1 billion rupees, from 12 billion in the same quarter last year, 21 analysts forecast.

Foreign Inflows

The Sensex has climbed 8.6 percent since slumping to a two-month low on June 24, helped by better-than-estimated corporate earnings. The gauge trades at 14.1 times projected 12-month earnings, compared with the MSCI Emerging Markets Index’s 10.1 times.

Six out the eight index members that have reported earnings so far for the June quarter exceeded analyst estimates. About 27 percent of companies in the gauge missed forecasts for the three months ended March, and 43 percent in the quarter through December.

Global funds bought $ 37 million of local shares on July 23, increasing this year’s net purchases to $ 12.4 billion, data compiled by Bloomberg show. They have sold a net $ 961 million of domestic stocks this month, the most among 10 Asian markets tracked by Bloomberg, extending June’s $ 1.8 billion sell-off.

To contact the reporter on this story: Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net

To contact the editor responsible for this story: Michael Patterson at mpatterson10@bloomberg.net