Indian stocks dropped for a third day amid concern a weakening currency may deter the central bank from lowering borrowing costs.

Bharat Heavy Electricals Ltd. (BHEL), the biggest power-equipment maker, declined for a second day. Tata Motors Ltd. (TTMT), owner of Jaguar Land Rover, fell to a one-week low. State Bank of India, the nation’s biggest lender, rallied to a four-year high after a 10-for-one stock split took effect today.

The S&P BSE Sensex (SENSEX) lost 0.1 percent to 28,019.5 at 10:22 a.m. in Mumbai, after changing direction at least six times. The gauge rallied for four straight weeks amid speculation the Reserve Bank of India may loosen monetary policy at its Dec. 2 meeting as inflation slows. The rupee dropped 0.3 percent to 62.165 per dollar, set for the lowest level since Feb. 20. A weak currency makes imports expensive, stoking price pressures in a nation that buys 80 percent of its oil from abroad.

“The rupee could be a spoilsport,” Deven Choksey, managing director at K.R. Choksey Shares & Securities Pvt., said today on Bloomberg TV India. “If the rupee falls, even for a brief period, the RBI may stay away from a rate cut for the time being, breaking the market’s rhythm.”

Governor Raghuram Rajan raised the repurchase rate three times from September 2013 through January to curb inflation. Consumer prices climbed at the slowest pace since at least January 2012 in October, while wholesale-price inflation was at the lowest since September 2009, data last week showed.

Bharat Heavy fell 1.8 percent to its lowest level since Oct. 23. Tata Motors dropped 1.4 percent for a third day. State Bank of India (SBIN) advanced 2.1 percent.

The Sensex, which closed at all-time highs five times in November, has risen 32 percent this year, the best performer among the world’s 30 largest equity markets. The gauge trades at 15.7 times projected 12-month earnings, compared with the MSCI Emerging Markets Index’s multiple of 11.

Global investors bought a net $ 2.4 million of local shares on Nov. 18, extending this year’s inflow to $ 15.4 billion, the most among eight Asian markets tracked by Bloomberg.

The dollar reached its highest level since August 2007 versus the yen amid divergent monetary policy in Japan and the U.S. The Bloomberg Dollar Spot Index climbed to a 5 1/2-year high. The gauge, which tracks the greenback against 10 major peers, is up 7.7 percent this year on speculation the Fed is moving closer to raising rates as the economy shows signs of being on a stronger footing.

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To contact the editors responsible for this story: Michael Patterson at Ravil Shirodkar, Phani Varahabhotla