(MENAFN- Gulf Times) India's benchmark stock-index dropped from a two-week high as investors awaited the outcome of the US Federal Reserve's meeting this week. Vedanta, the largest copper producer, and Tata Steel were the biggest decliners on the S&P BSE Sensex. Tata Motors, owner of Jaguar Land Rover, slid the most in three weeks, while Larsen & Toubro, the most valuable engineering company, declined 3%. Axis Bank had the steepest fall in a week.
The S&P BSE Sensex lost 0.6% to 25,705.93 at the close in Mumbai yesterday. The gauge had jumped 1% on Monday after the two main inflation indexes showed a continued easing. Odds of a Federal Reserve rate increase at its September 16-17 meeting remain at 28%, down from more than 50% before China roiled markets with its surprise yuan devaluation last month.
"There's no certainty that the rate increase will happen," Hemant Kanawala, the head of equities at Kotak Mahindra Old Mutual Life Insurance, which has $2bn in assets, said in an interview with Bloomberg TV India. "If it happens, it will end the uncertainty that's been around for the past three to four months. If it gets deferred, the uncertainty will return and flows to emerging markets will remain impacted."
International investors bought $20.5mn of shares on Monday, ending 10 straight days of net outflows. They pulled $2.6bn from local shares in August, the worst outflow since October 2008, amid the turmoil in emerging-market equities triggered by China's currency devaluation.
Consumer price inflation, the Reserve Bank of India's benchmark, eased to 3.66% in August, compared with the median 3.57% estimate in a Bloomberg survey of analysts. Wholesale prices slid by record 4.95% after dropping 4.05% in July, the data showed. Even so, a looming El Nino weather phenomenon and monsoon rains 16% below normal may push up food costs, deterring the central bank from cutting interest rates.
Meanwhile the rupee declined amid outflows from local stocks ahead of the Federal Reserve's rate-setting meeting.
Global funds have been net sellers in 10 of the last 11 days, withdrawing $891mn of shares in September, the latest Bloomberg-compiled data show. That's taken outflows for the quarter to $2.6bn, the most since 2008.
"There's caution ahead of the Fed meeting but expectations are that a rate increase could be moved to December," said Gaurav Sharma, a senior currency analyst at Religare Commodities in Noida, near New Delhi. "Apart from the rate action, markets will be focusing on the Fed's commentary."
The rupee fell 0.1% to 66.3650 a dollar in Mumbai, according to prices from local banks compiled by Bloomberg. The currency fell to 66.4725 in intraday trading. It has declined 4.1% this quarter. The currency sank to a record 68.845 a dollar in August 2013.
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