Indian stocks fell from the highest level in more than two years after the central bank tightened lenders’ access to cash to support the rupee after the currency slid to a record earlier this month.
The S&P BSE Sensex lost 0.3 percent to 20,237.98 at 9:49 a.m. in Mumbai, with a gauge of lenders headed for its lowest level since September. State Bank of India, the biggest lender by assets, dropped 2.2 percent, pacing losses among its peers.
The Reserve Bank of India capped banks’ access to cash and raised the daily balance requirement for the reserve ratio, as it stepped up efforts to steady the rupee. The RBI on July 15 increased two interest rates and moved to drain money from the economy through bond sales, joining emerging nations from Brazil to Indonesia in tightening policy to stabilize currencies.
The recent moves by Reserve Bank Governor Duvvuri Subbarao contrast with his decisions to cut the benchmark interest rate by 25 basis points each in January, March and May, in a bid to fight the weakest economic growth in a decade. He left the rate unchanged at 7.25 percent in June and the central bank’s next policy review is due on July 30.
The Sensex has climbed 9.1 percent since June 26, helped by better-than-estimated corporate earnings. Five out the seven index members that have reported earnings so far for the June quarter beat 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.
The Sensex trades at 14.2 times projected 12-month earnings, the most expensive since February 2012, compared with the MSCI Emerging Markets Index’s 10.1 times.
Global funds sold $ 64 million of local shares on July 22, paring this year’s net purchases to $ 12.3 billion, according to data compiled by Bloomberg. They have sold a net $ 998 million of domestic stocks this month, the most among 10 Asian markets tracked by Bloomberg, extending June’s $ 1.8 billion sell-off.
last week. The central bank left its benchmark repurchase rate unchanged in June even as the economy expanded at the slowest pace in a decade in the year ended March 31.
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