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India Stocks Decline After Central Bank Cautions on Shadow Banks

India Stocks Decline After Central Bank Cautions on Shadow Banks

(Bloomberg) -- Indian stocks dropped for a third day to close at their lowest level in more than two months after the central bank said it’s seeing “signs of fragility” in some lenders.

The benchmark S&P BSE Sensex Index fell 0.8% to 38,031.13 at the close in Mumbai, while the NSE Nifty 50 Index dropped 0.7%. Both measures declined to their lowest levels since mid-May.

The Reserve Bank of India is monitoring non-banking finance companies amid signs of stress to prevent another potential surge in soured debt. Investors last week were spooked by higher taxes on the wealthy and some foreign funds in the budget.

Of the seven Nifty companies that have announced earnings so far, five have either met or exceeded analyst estimates. Kotak Mahindra Bank Ltd. will announce its earnings later in the day.

Strategist View

  • “Investors are hoping that good corporate numbers might save the current rout but eventually there will be disappointment,” said Jimeet Modi, founder of Samco Securities Ltd. Investors should conserve cash and consider selling overvalued stocks, he said.
  • “Markets are facing headwinds on both domestic and global fronts and might take a further beating,” said Ajit Mishra, vice president of research at Religare Broking Ltd. “We advise keeping a cautious stance and hedging positions.”

The Numbers

  • 9 of the 19 sector sub-indexes compiled by BSE Ltd. declined, led by a gauge of finance stocks.
  • Fourteen of the 31 Sensex members and 21 of the 50 Nifty stocks declined.
  • Housing Development Finance Corp. was the top loser on the benchmark while Yes Bank Ltd. surged the most.

Analyst Notes/Equity-Related Stories

To contact the reporter on this story: Abhishek Vishnoi in Singapore at avishnoi4@bloomberg.net

To contact the editors responsible for this story: Lianting Tu at ltu4@bloomberg.net, Margo Towie, Kurt Schussler

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