Mumbai: Indian stocks declined on concern inflation will limit the central bank’s room to ease monetary policy, curbing economic growth.
Bharti Airtel Ltd, the largest mobile-phone operator, dropped to near a six-year low. Housing Development Finance Corp, the biggest mortgage lender, fell the most in a week. The BSE India Sensitive Index lost 0.2 per cent to 17,853.19 at 10.07am in Mumbai, bound for the first drop in three days.
Indian consumer prices increased 9.86 per cent in July, the Central Statistical Office said yesterday, remaining at more than 9 per cent for a fifth straight month as rising food costs offset a drop in fuel prices. Persistent price pressures may limit the Reserve Bank of India’s room to cut interest rates, threatening economic growth that’s already the slowest in almost a decade.
The central bank left rates unchanged at 8 per cent last month to tackle inflation risks as the rupee declined and the impact of deficient monsoon rains on crops threaten to boost prices. Asia’s third-largest economy grew 5.3 per cent in the March quarter, the weakest pace in nine years.
Borrowing costs will fall when inflation cools, Deputy Governor K.C. Chakrabarty said on August 16. Price growth of 5 per cent is within the bank’s “comfort zone”, he said.
The Sensex has increased 16 per cent this year, helped by record overseas investor purchases. Foreign funds bought a net $58 million (Dh213 million) of stocks on August 17, the 15th consecutive day of net purchases, taking their investments in equities this year to $11.5 billion, data from the regulator show. That’s an all-time high for the period and the most this year among 10 Asian markets tracked by Bloomberg.