Electronic board indicating the latest stock figures are reflected in a glass facade at the National Stock Exchange of India Ltd. (NSE) in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

India Stocks Slide, Joining Global Rout on Macro, Trade Concerns

(Bloomberg) -- Indian shares slid as concerns over trade issues and the global economy overwhelmed local benefits from a decline in oil prices and government stimulus measures.

Asian stocks completed their worst week since October as renewed U.S.-China tensions and concern about a partial U.S. government shutdown added to negative narratives in the wake of the Federal Reserve proving less dovish than investors had hoped.

The Indian National Congress made good on an election promise, waiving some loans owed by farmers in three states it won last week from Prime Minister Narendra Modi’s Bharatiya Janata Party. Modi has thus far held back on launching a federal program to void farm loans, but has hinted at further consumer tax cuts and has pressured the Reserve Bank of India to ease lending restrictions on state-run banks, and to transfer surplus capital to close a yawning budget gap.

The Numbers

  • The S&P BSE Sensex slid 1.9 percent to 35,742.07 as all industry groups declined. The NSE Nifty 50 Index also dropped 1.8 percent.
  • All 19 sector indexes compiled by BSE Ltd. fell, led by technology-related groups.
  • Adani Ports & Special Economic Zone Ltd. was the worst performer on the benchmark gauge
  • The S&P BSE MidCap and S&P BSE SmallCap indexes fell for the first time in nine sessions.
  • The India NSE Volatility Index climbed 11.6 percent, back to near 16.

Strategic Views

  • “We are now in sync with markets in the region, that are reflecting the pressure in the mother market of the U.S.,” said A. K. Prabhakar, head of research at IDBI Capital Market Services Ltd. “With national elections five-six months away, and in a populist move the states, one after the other, are announcing loan waivers, which isn’t a good sign for the economy.”
  • “From a short-term perspective, the government’s intention to use the central bank surplus to improve liquidity, invest in state-run banks and infrastructure projects is a positive,” said Ritesh Ashar, chief strategy officer at Mumbai-based KIFS Trade Capital Pvt. “However, it may raise a question mark on the credibility of the RBI.”

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