Sensex takes a beating as construction stocks slump

Mumbai: India's stocks fell to a six-week low, led by Jaiprakash Associates Ltd and other construction stocks after former Reserve Bank of India (RBI) governor, Bimal Jalan, said the nation's central bank needs to drain cash from the economy.

Jaiprakash, India's biggest builder of dams, and Larsen & Toubro Ltd., the largest engineering company, slid to their lowest in three weeks as Jalan said the government needs to check speculation in commodities after food-price inflation climbed.

Tata Consultancy Services Ltd., the biggest software exporter, rose to a record after better-than-estimated profit at Oracle Corp.

The Bombay Stock Exchange's Sensitive Index, or Sensex, slid 118.63, or 0.7 per cent, to 16,601.20. The S&P CNX Nifty Index on the National Stock Exchange fell 0.7 per cent to 4,952.60. The BSE 200 Index declined 0.7 per cent to 2,083.13.

"Some measures will be taken by the central bank in January to curb inflation," said Vaibhav Sanghavi, a director at Ambit Capital Ltd. in Mumbai, who manages funds for wealthy individuals. Sanghvi expects the central bank to raise the cash reserve ratio next month and said that may be followed by increases in interest rates.

Jaiprakash fell 2.6 per cent to Rs143.60, while Larsen declined 2.4 per cent to Rs1,610.05, the lowest since November 27. Bharat Heavy Electricals Ltd., India's biggest power- equipment maker, slid 1 per cent to Rs2,295.15.

"Reduction in availability of money may help in reducing the speculative pressure on retail prices," Jalan said.