Domestic stocks retreat before Fed meeting outcome

Indian stocks declined for the second day this week as investors awaited the US Federal Reserve meeting for a signal on the timing of its first interest-rate increase since 2006.

NTPC, the nation’s largest power generator, was the worst performer on the benchmark S&P BSE Sensex. Bharat Heavy Electricals, the biggest power-equipment maker, fell for the first time in three days. Tata Motors, owner of Jaguar Land Rover, declined the most in five weeks.

The Sensex lost 0.4 per cent to 28,622.12 at the close. The Fed may cut a reference to being “patient” on rate rises in its policy statement, Morgan Stanley and BNP Paribas SA say, giving itself flexibility on the timing of an interest rate increase. Higher US borrowing costs could damp inflows into emerging-market equities. Foreigners have bought $ 5.3 billion of Indian shares this year, the most among eight Asian markets tracked by Bloomberg.

The Fed will actually drop the word patient and that’s what everybody expects and that’s what the market has priced in, Hans Goetti, Singapore-based head of investment for Asia at Banque Internationale a Luxembourg SA, which has about $ 36 billion, said in an interview with Bloomberg TV India. “The Fed is aware that markets have an impact on the economy. The last thing the Fed wants is to surprise the market.”

US data
The S&P 500 Index fell as much as 0.8 per cent on Tuesday, after rallying the day before by the most since February 3 amid data showing an unexpected drop in factory production and a retreat in confidence among US home builders. A report Tuesday indicated housing starts plunged in February, while an increase in building permits indicated the drop may prove temporary.

“We don’t think an interest-rate hike is imminent simply, because economic data that’s come out in the past few weeks has started to deteriorate,” Goetti said.

NTPC tumbled 3.3 per cent, the most since May 9. Bharat Heavy retreated 2.7 per cent. Tata Motors decreased two per cent.

Oil & Natural Gas Corp, India’s largest state-owned oil explorer, lost 1.6 per cent, the most since February 24. Wipro, the third-biggest software exporter, slid 1.9 per cent. Bharti Airtel, India’s largest mobile-phone operator, lost 1.1 per cent for a third day of drop.

Global investors sold a net $ 111 million of local shares on March 16, paring the month’s inflows to $ 941.4 million. The Sensex has risen 4.1 per cent this year and trades at 16 times projected 12-month earnings, compared with the MSCI Emerging Markets Index’s multiple of 11.7.