Indian (SENSEX) stock-index futures dropped after data showed the nation’s consumer-price inflation topped estimates, adding pressure on central bank Governor Raghuram Rajan to raise interest rates again next week.
SGX CNX Nifty Index futures for December delivery fell 0.7 percent to 6,211.0 at 9:50 a.m. in Singapore. The underlying CNX Nifty (NIFTY) Index on the National Stock Exchange of India Ltd. sank 1.1 percent to 6,237.05 yesterday. The S&P BSE Sensex retreated 1.2 percent to 20,925.61. The Bank of New York Mellon India ADR Index of U.S.-traded shares lost 2 percent to 1,115.99. One-month rupee forwards weakened 0.7 percent today.
Consumer prices rose a more-than-estimated 11.24 percent in November from a year earlier, data yesterday showed. The central bank’s push to stem price increases has damped spending in the world’s second-most populous nation. Another report yesterday showed industrial production contracted 1.8 percent in October, more than the median forecast of a 1.2 percent drop.
“Inflation and interest rates are the biggest threat to economic growth,” Aneesh Srivastava, chief investment officer at IDBI Federal Life Insurance Co., which manages about 23 billion rupees ($ 373 million), said by phone yesterday. He expects the central bank to increase the benchmark interest rate by 25 basis points next week.
Rajan has raised the main interest rate twice after he moved to the central bank in September to fight rising prices. He may raise the key interest rate to 8.5 percent next year from 7.75 percent, Goldman Sachs Group Inc. said on Nov. 21. The Reserve Bank of India’s next policy meeting is on Dec. 18.
Uncomfortable Level
‘We are very uncomfortable with the current level of inflation,’’ Rajan told reporters in Kolkata yesterday after the data were released. “We are aware of the weak economy, but we also have to take into account inflationary pressures.”
The Sensex climbed to a record Dec. 9 after the Bharatiya Janata Party won the state elections, giving it momentum to end the ruling Congress party’s decade-long rule in polls due by May and install Narendra Modi as prime minister. Modi is credited with achieving higher growth than the national average and increasing power capacity more than fivefold in his home state of Gujarat since becoming chief minister in 2001.
Global investors bought a net $ 160 million of local shares on Dec. 11, taking this year’s inflows to $ 18.7 billion, the most in Asia after Japan, data from the market regulator show.
The Sensex has climbed 7.7 percent this year, the best performer among the four largest emerging markets, and trades at 13.6 times projected 12-month earnings, compared with the MSCI Emerging Markets Index’s 10.3 times.
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
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