India Stocks Drop Most in Four Months as Oil Jump Dents Optimism

(Bloomberg) -- India’s benchmark stock index posted its biggest drop in four months on concern that the spike in the price of oil, the nation’s biggest import, may dampen the outlook for Asia’s third-biggest economy. The rupee and sovereign bonds also weakened.

The S&P BSE Sensex declined 1.3 percent to 38,645.18 at the close in Mumbai, while the NSE Nifty 50 Index slipped 1.4 percent. The price of Brent crude jumped to the highest level in almost six months as the U.S. government was said to be planning to eliminate sanction waivers that allowed buyers to import Iranian crude.

Foreigners have pumped more than $7.5 billion into Indian equities this year on expectations that interest rate cuts and the prospective re-election of Prime Minister Narendra Modi’s government will support earnings growth. Votes in the general election that started April 11 will be counted on May 23. India’s earnings season is underway with five of the 49 Nifty companies that have reported earnings so far either beating or matching estimates, according to data compiled by Bloomberg.

India Stocks Drop Most in Four Months as Oil Jump Dents Optimism

Strategist View

  • The spike in the prices of crude oil may weigh on markets at higher levels, said Sameer Kalra, president at Mumbai-based advisory Target Investing. On the other hand, a better-than expected earnings season so far will help stocks “to hold on to the valuations and keep the flow momentum.”
    • NOTE: Iran is India’s third-biggest crude oil supplier and any sanctions can bump up the import bill significantly for a country that relies on imports to meet about 80 percent of its energy requirement.
  • "At this juncture, one needs to be extremely stock specific by following a proper exit strategy,” Sameet Chavan, a technical analyst at Angel Broking Ltd., wrote in a note on Saturday.

The Numbers

  • Seventeen of the the 19 sector indexes compiled by BSE Ltd. declined, led by a gauge of oil and gas stocks.
  • Yes Bank Ltd. fell the most on the benchmark gauge while software exporters such as Tata Consultancy Services rose, tracking weakness in the local currency.
  • Twenty four of the 31 Sensex members and 40 of the 50 Nifty companies declined.
  • Jet Airways India Ltd. slumped for a second day after the carrier suspended all its flights.

Analyst Notes/Market-Related Stories

  • Foreigners Turn Tail on Indian Bonds, Continue to Buy Stocks
  • India’s Next Government Needs to Ax Its Banks: Neelkanth Mishra
  • RBI Minutes Show the Door Open to Further Rate Cuts: Economics
  • Slowdown Fears Sway India’s Monetary Policy Makers, Minutes Show
  • Oil Jumps as U.S. Is Said to End Iran Waivers After May 2 Expiry

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