Indian stocks, rupee, bonds fall as polls show no clear mandate
Friday, 15 May 2009
MUMBAI, May 14 (Bloomberg): India's stocks, currency and bonds fell after exit polls indicated no political party will win enough votes to form the next government ahead of the official count on May 16.
The benchmark Bombay Stock Exchange's Sensitive Index, or Sensex, lost 123.87, or 1 per cent, to 11,895.78 as of 1:48 p.m. in Mumbai, led by declines in Reliance Industries Ltd. and Bharti Airtel Ltd. The rupee retreated for a second day to the lowest in more than a week, while bonds dropped.
Six television networks forecast the ruling alliance led by Congress may emerge just ahead of its chief rival headed by the Bharatiya Janata Party. CNN-IBN predicted Congress and its allies will get as many as 205 seats compared with a maximum 185 for the opposing coalition. Star News-Nielsen and News X gave the Congress-led bloc 199 seats to 191 for the BJP grouping.
"The exit polls are too close to call; we have to wait for a couple of days for clarity," said Vaibhav Sanghavi, a director at Ambit Capital Ltd. in Mumbai, who manages funds for wealthy individuals. "Either of the national parties not having a say in the new government is a negative for the market."
The S&P CNX Nifty Index on the National Stock Exchange lost 0.8 per cent to 3,605.35. The BSE 200 Index slid 0.5 per cent to 1,409.47. SGX Nifty futures for May delivery retreated 0.7 per cent to 3,613.
Reliance, owner of the world's biggest refining complexes, declined 1.1 per cent to 1,911 rupees, Bharti, the country's largest mobile-phone operator, dropped 3.8 per cent to 765.35, while ICICI Bank Ltd., the No. 2 lender, fell 3.3 per cent to 532.70.
The rupee weakened 0.2 per cent to 49.775, the lowest since May 4, after falling as much as 0.7 per cent to 50.0250 per dollar.
Bonds also dropped. India's offering 80 billion rupees of five-year securities and 40 billion rupees of debt maturing in 2022.
The yield on the 6.05 per cent bond maturing in 2019 rose five basis points to 6.38 per cent, according to the central bank's trading system.
"A prudent strategy would be to avoid bonds in the very short term," said Roy Paul, assistant manager of treasury at Federal Bank Ltd. in Mumbai. "Persistent pressure on yields to rise is a certainty."
India needs to cut its budget deficit to avoid having its credit rating lowered, Fitch Ratings said today. It has assigned India a BBB- rating, its lowest investment grade, and expects the nation's new government to step up spending to arrest slowing economic growth. That will widen the national budget deficit to more than 10 per cent of gross domestic product for the second year in a row, according to the agency.
The next government will "really have to finance the stimulus package and then we also see that corporate revenues are still trending downwards," said Roger Groebli, Singapore- based head of financial market analysis at LGT Capital Management, who oversees $80 billion worldwide.
The Sensex plunged 11 per cent on May 17, 2004, the most in more than a decade, on investor concern a government formed by Sonia Gandhi's Congress Party and communist allies would slow the pace of reforms.
The Sensex was the worst performer in the first quarter among the so-called BRIC markets that also include Brazil, Russia and China. The gauge rebounded 22 per cent in the second quarter, beating benchmark indexes in Brazil and China.
The benchmark Bombay Stock Exchange's Sensitive Index, or Sensex, lost 123.87, or 1 per cent, to 11,895.78 as of 1:48 p.m. in Mumbai, led by declines in Reliance Industries Ltd. and Bharti Airtel Ltd. The rupee retreated for a second day to the lowest in more than a week, while bonds dropped.
Six television networks forecast the ruling alliance led by Congress may emerge just ahead of its chief rival headed by the Bharatiya Janata Party. CNN-IBN predicted Congress and its allies will get as many as 205 seats compared with a maximum 185 for the opposing coalition. Star News-Nielsen and News X gave the Congress-led bloc 199 seats to 191 for the BJP grouping.
"The exit polls are too close to call; we have to wait for a couple of days for clarity," said Vaibhav Sanghavi, a director at Ambit Capital Ltd. in Mumbai, who manages funds for wealthy individuals. "Either of the national parties not having a say in the new government is a negative for the market."
The S&P CNX Nifty Index on the National Stock Exchange lost 0.8 per cent to 3,605.35. The BSE 200 Index slid 0.5 per cent to 1,409.47. SGX Nifty futures for May delivery retreated 0.7 per cent to 3,613.
Reliance, owner of the world's biggest refining complexes, declined 1.1 per cent to 1,911 rupees, Bharti, the country's largest mobile-phone operator, dropped 3.8 per cent to 765.35, while ICICI Bank Ltd., the No. 2 lender, fell 3.3 per cent to 532.70.
The rupee weakened 0.2 per cent to 49.775, the lowest since May 4, after falling as much as 0.7 per cent to 50.0250 per dollar.
Bonds also dropped. India's offering 80 billion rupees of five-year securities and 40 billion rupees of debt maturing in 2022.
The yield on the 6.05 per cent bond maturing in 2019 rose five basis points to 6.38 per cent, according to the central bank's trading system.
"A prudent strategy would be to avoid bonds in the very short term," said Roy Paul, assistant manager of treasury at Federal Bank Ltd. in Mumbai. "Persistent pressure on yields to rise is a certainty."
India needs to cut its budget deficit to avoid having its credit rating lowered, Fitch Ratings said today. It has assigned India a BBB- rating, its lowest investment grade, and expects the nation's new government to step up spending to arrest slowing economic growth. That will widen the national budget deficit to more than 10 per cent of gross domestic product for the second year in a row, according to the agency.
The next government will "really have to finance the stimulus package and then we also see that corporate revenues are still trending downwards," said Roger Groebli, Singapore- based head of financial market analysis at LGT Capital Management, who oversees $80 billion worldwide.
The Sensex plunged 11 per cent on May 17, 2004, the most in more than a decade, on investor concern a government formed by Sonia Gandhi's Congress Party and communist allies would slow the pace of reforms.
The Sensex was the worst performer in the first quarter among the so-called BRIC markets that also include Brazil, Russia and China. The gauge rebounded 22 per cent in the second quarter, beating benchmark indexes in Brazil and China.