Invest In India

Indian stocks fell the most in a week, led by construction companies, on concern the government will raise less than expected from share sales to fund infrastructure and after it postponed the sale of mobile phone licenses.

Jaiprakash Associates Ltd., a builder of dams and roads, slumped to the lowest in three months after investors offered the government lower prices than forecast for equity in NTPC Ltd., a power producer. The delay of an auction of third- generation mobile phone licenses that would help fund the government’s deficit contributed to the drop. Bharti Airtel Ltd. sank 1.6 percent.

“Investors are concerned about how the government will address the fiscal deficit on a sustainable basis,” said Mohit Mirchandani, who helps manage $127 million at Taurus Mutual Fund in Mumbai. “That concern has increased after the 3G auction delay.”

The Bombay Stock Exchange’s Sensitive Index, or Sensex, fell 271.10, or 1.6 percent, to 16,224.95, the steepest decline since Jan. 27. The S&P CNX Nifty Index on the National Stock Exchange lost 1.8 percent to 4,845.35. The BSE 200 Index also retreated 1.8 percent to 2,055.29.

Jaiprakash slipped 4.5 percent to 131.2 rupees, its lowest close since Nov. 3. DLF Ltd., India’s biggest developer, slid 4.4 percent to 321.35 rupees.

Government Target

Investors offered to buy only 80 percent of the 412 million NTPC shares that went on sale yesterday, according to data on the National Stock Exchange Web site as of 4 p.m. today. Offers ranged from the 201 rupees minimum per share to a maximum 210 rupees.

The NTPC share sale’s “overall collection will be 10 to 15 percent lower than what was expected,” said Ambareesh Baliga, vice president of equities at Karvy Stock Broking Ltd. in Mumbai. “The earlier expectation was that the offer would happen at a higher level.”

NTPC, India’s biggest power generator, declined 1 percent to 207.7 rupees.

The government aimed to raise more than $2 billion from the sale of 5 percent of NTPC’s shares, according to JPMorgan Chase & Co., one of the banks helping to manage the offer.

Prime Minister Manmohan Singh’s government, which owns 89.5 percent of the New Delhi-based utility, is accelerating the sale of stock in state-run companies to help plug the fiscal deficit and take advantage of an 81 percent advance in the nation’s benchmark stock index last year.

Budget Gap

The share sales may help India boost economic growth by increasing spending on infrastructure and trimming the budget shortfall, forecast to reach a 16-year high of 6.8 percent of gross domestic product by March 31.

State Bank of India led a decline in lenders as a government report today showed the nation’s food inflation accelerated for a second week to near an 11-year high, fueling expectations the central bank may raise borrowing costs after last week ordering lenders to set aside more cash reserves.

“Inflation is a big problem,” Kevin Grice, an economist at Capital Economics Ltd. in London, said before the report. “A hike in policy rates is still imminent.”

State Bank, the largest lender, declined 2.6 percent to 1,947.9 rupees. Housing Development Finance Corp., the biggest mortgage lender, lost 3.9 percent to 2,418.5 rupees. ICICI Bank Ltd., the country’s second-biggest lender, fell 1.3 percent to 828.8 rupees. Axis Bank Ltd., the fourth-largest lender by market value, fell 2.1 percent to 1,048.45 rupees.

Inflation

Consumer-price inflation in India is the highest among Asia-Pacific countries, according to Bloomberg data.

Bharti Airtel, India’s largest mobile-phone operator, fell 1.6 percent to 304.1 rupees. The government may not hold the auction of 3G licenses by March 31, Finance Secretary Ashok Chawla said yesterday, without giving a new date. The auction would be completed before April 1, Communications Minister Andimuthu Raja said on Jan. 19. The government in October set Jan. 14 as the tentative deadline to start taking bids for the airwaves.

Reliance Communications Ltd., the second-largest mobile- phone operator, retreated 3.7 percent to 164.8 rupees. The stock was downgraded to “reduce” from “hold” at Emkay Global Financial Services Ltd.

Infosys Drops

Software stocks declined after a report showed the U.S. services industry expanded less than forecast. The Institute for Supply Management’s index of non-manufacturing businesses in the U.S., which make up almost 90 percent of the economy, rose to 50.5, lower than the median economist estimate of 51 in a Bloomberg survey.

Infosys Technologies Ltd., the second-largest software services provider, lost 1.8 percent to 2,429.05 rupees, while larger rival Tata Consultancy Services Ltd. plunged 1.9 percent to 738.7 rupees. Wipro Ltd., the No. 3, fell 2.5 percent to 655.2 rupees. The U.S. accounts for 40 percent of India’s software sales.

Indian state refiners gained after a government-appointed panel recommended that prices of gasoline and diesel be freed, easing their losses from selling fuels below cost. Indian Oil Corp. rose 0.3 percent to 316.8 rupees. The stock had earlier soared as much as 5.1 percent. Bharat Petroleum Corp. gained 0.5 percent to 583 rupees, paring its earlier advance of as much as 3.4 percent.

Tata Motors Falls

Tata Motors Ltd., India’s biggest truckmaker and owner of Jaguar Land Rover Ltd., lost 4.4 percent to 689.6 rupees and Mahindra & Mahindra Ltd., the largest maker of sport-utility vehicles and tractors, slid 3.5 percent to 1,017 rupees after the government-appointed panel recommended additional duty on diesel-powered vehicles.

“That is a concern,” said Umesh Karne, a Mumbai-based analyst at BRICS Securities Ltd. “Tata Motors is the biggest maker of diesel-powered passenger vehicles in India and the additional duty, if implemented, could dampen sales.”

Overseas funds bought a net 109 million rupees ($2.35 million) of Indian stocks on Feb. 2, paring their outflows this year to 3.41 billion rupees, the Securities and Exchange Board of India said on its Web site.

Foreign fund flows into India’s stock market rose to a record 834.2 billion rupees in 2009, beating the previous high set two years earlier in local currency terms, as the biggest rally in 18 years lured foreign investors.