Indian stock brokers react while watching the Bombay Stock Exchange (BSE) index on their trading terminal in Mumbai last week. India cut the withholding tax on overseas borrowings by companies and announced plans to add mutual funds to a scheme aimed at luring individual investors to stocks. Image Credit: AP

India stocks dropped on concern the country’s slowing economic growth outweighs the effect of policy efforts to boost demand and will be a drag on corporate earnings.

The S&P BSE Sensex Index fell 0.3 per cent to 40,675.45 at the 3.30pm close in Mumbai, retreating from a record close on Thursday.

The NSE Nifty 50 Index dropped by 0.5 per cent. Equities are declining globally after US President Donald Trump called for fresh tariffs on some countries.

India’s economic growth collapsed below 5 per cent for the first time since 2013 in the three months through September. While that gives the central bank more reason to cut interest rates for a sixth time this year at its December 5 meeting, Nomura Holdings Inc. has cautioned that constraints in getting credit into the economy may continue to crimp demand.

The Reserve Bank of India has lowered borrowing costs by the most of any Asian central bank this year, while the government has cut taxes and funded troubled industries in a bid to revive the economy.

Strategist View

The weakness in economic indicators is “likely to impact the investor sentiment,” Ajit Mishra, vice president of research at Religare Broking Ltd. wrote in a note on Monday. “All eyes will now be on RBI monetary policy for economic revival measures.”

The problems arising out of weak economic growth are “under-appreciated,” Credit Suisse Group AG’s strategist Neelkanth Mishra wrote in a note on Monday. The second-order effects of weak growth include affect on viability of loans, slower investments, tax collections and fiscal situation, Mishra added in the note.