Global Rally Skips Indian Stocks as Nation Retaliates to Attacks

(Bloomberg) -- Indian equities declined, skipping a global rally, as investors assessed the nation's retaliation to a deadly attack on its defense forces last week. Four security personnel and two militants were killed in the Indian army's military encounter in Kashmir.

The benchmark S&P BSE Sensex fell 0.9 percent to 35,498.44 at the 3:30 p.m. close in Mumbai, capping an eighth day of declines, its longest losing streak since August 2013. The NSE Nifty 50 Index retreated 0.8 percent.

Even though a global rally typically spurs Indian equities, local investors weighed the scope and costs of the nation's retaliation to the attack on its defense forces last week. The assault came as the government ramps up to hold a national election that will test its popularity.

Read more on India's encounter in Kashmir, a retaliation to deadly attacks last week

Strategist View

• “Military escalation on the border with Pakistan will have a negative sentimental impact on the markets,” said Abhimanyu Sofat, head of research at IIFL Securities Ltd. in Mumbai. “It needs to be seen if the government changes its focus now and cuts down on doles to boost consumer spend.”
• “The confidence of people to invest has come down significantly and the markets will be closer to the bottom soon,” he said.
• “Liquidity squeeze continues to be a worry and investors will wait to see if economic growth is translating into a rise in the pace of company profits,” Sofat said.

The Numbers

• Thirty-seven of the 50 Nifty shares and 24 of the 31 Sensex stocks dropped, paced by software behemoth Tata Consultancy Services Ltd.'s 2.9 percent decline.
• Yes Bank Ltd. fell 2.5 percent after the banking regulator reprimanded it for selectively revealing a “confidential” report.
• Seventeen of the 19 sector indexes compiled by BSE Ltd. declined, led by a gauge of consumer-durable stocks.
• The India NSE Volatility Index jumped 9.4 percent, its steepest in nearly two months.
• Companies controlled by billionaire Anil Ambani -- Reliance Capital Ltd., Reliance Communications Ltd., Reliance Infrastructure Ltd. and Reliance Power Ltd. -- jumped in the range of 2 to 11 percent. The group reached an agreement with most lenders, under which they won't sell any shares pledged by founders until September.

Analyst Notes/Market-related Stories

• Yes Bank Remains ‘Bad Boy' For RBI Even After Clean Audit Report
• Buyback Spree Alive in India as State Firms Join Tech Majors
• Hedge Fund Operator Plans $1 Billion India-Focused ESG Fund

To contact the reporter on this story: Ameya Karve in Mumbai at akarve@bloomberg.net

To contact the editors responsible for this story: Divya Balji at dbalji1@bloomberg.net, Margo Towie, Kurt Schussler

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