Indian Stocks Decline, Led by Banks, on Oil, Inflation Concern

By Pooja Thakur

Aug. 21 (Bloomberg) -- Indian stocks fell, with the Sensitive Index posting its biggest drop in more than three weeks, amid concern rising oil prices will boost inflation and crimp consumer spending.

State Bank of India, the country's largest lender by assets, fell the most in three weeks and ICICI Bank Ltd., the second- biggest, sank 5.2 percent after oil rose for a third day. A government report today may show that inflation quickened to the fastest pace in 16 years, as fuel costs rose.

``Inflation concerns continue to dog the market,'' said Ajay Bodke, who helps manage the equivalent of $872 million of stocks at IDFC Mutual fund in Mumbai. ``Inflation remaining high is a worry.''

The Bombay Stock Exchange's Sensitive Index, or Sensex, fell 434.50, or 3 percent, to 14,243.73, the most since July 29. All but one stock in the Sensex declined. The S&P CNX Nifty Index on the National Stock Exchange slid 131.90, or 3 percent, to 4,283.85.

Oil for October delivery rose as much as 2.1 percent to $117.35 a barrel on the New York Mercantile Exchange and last traded at $117.29. India is Asia's third-largest oil user.

Faster inflation, coupled with a global economic slowdown, may weaken expansion in India's $912 billion economy, Asia's third largest. JPMorgan Chase & Co. cut India's growth forecast to 7.5 percent in the year ending March 2010 from an estimated 8 percent, the brokerage said in a report today.

State Bank of India declined 7 percent to 1,343.10 rupees, its lowest since July 29. ICICI fell to 643.70 rupees, its worst close since Aug. 4. HDFC Bank Ltd., the third-largest, dropped 5.8 percent to 1,166.35 rupees, the most since July 29.

Overseas investors sold a net 11.4 billion rupees ($281.6 million) of Indian stocks on August 19, increasing their net outflow this year from equities to $6.9 billion, according to the nation's stock market regulator.

To contact the reporter on this story: Pooja Thakur in Mumbai at pthakur@bloomberg.net