Mumbai: Indian equities headed for their third decline in four days, paced by a drop in Yes Bank Ltd., after a report that a client defaulted on a loan.
The benchmark S&P BSE Sensex dropped 0.3% to 39,573.21 as of 11:37 a.m. in Mumbai after fluctuating in the first hour of trading. The NSE Nifty 50 Index retreated by the same magnitude. Yes Bank slid 6%, the steepest among Sensex and Nifty members after the Economic Times reported that Radius Developers defaulted on scheduled interest payments on a 12 billion rupee ($174 million) loan, citing unidentified people.
Investors are in a wait-and-see stance ahead of the government budget due July 5 and next week’s start of corporate earnings reports for the June quarter. A sluggish beginning to India’s monsoon season, a crucial source of irrigation water, has weighed on local market sentiment and raised concern that consumer spending may slump among the nation’s farmers. Additionally, increasing corporate defaults stoke fear of a broader, systemic credit crisis.
Strategist View
- “Signs of loosening monetary policies locally and globally and hope for a fiscal stimulus by the Indian government are the key positives for Indian equities,” said Girish Pai, head of institutional equity research at Nirmal Bang Equities Pvt. in Mumbai. “Having said that, how much room the government has for stimulus also needs to be seen.”
- Erratic rainfall, a decline in consumption, a slowing global economy and a credit crunch in India are negatives that weight on investor sentiment, Pai said. “Benchmark valuations are also on the higher side and investors are chasing only quality companies.”
Also read: Yes Bank plans to raise $1.2 billion to boost capital, CEO says
The Numbers
- Twelve of the 19 sector indexes compiled by BSE Ltd. fell, led by a gauge of property stocks.
- Twenty-one of the 31 Sensex members and 32 of the 50 Nifty stocks declined.
- Cox & Kings Ltd. dropped 5% to a new record after Care Ratings lowered the travel planner’s debt score. The company said it’s taking measures to resolve a cash flow mismatch.
- IL&FS Transportation Networks Ltd. slid 6.2% after it defaulted on 244 million rupees of repayments.
Analyst Notes/Market-Related Stories
- Bond Vigilantes Seen Giving India’s Modi a Pass on Wider Deficit
- India Will Stick to 3.4% Deficit Target in Budget: Credit Suisse
Also read: RBI to the rescue – Modi govt eyes bank’s Rs 9.6 trillion surplus to beat economy blues