India’s Index Futures, Rupee Forwards Fall After Terror Attacks

By Chen Shiyin and Pooja Thakur
Nov. 27 (Bloomberg) -- India’s stock index futures and rupee forwards fell while credit-default swaps rose after militants killed 101 people in Mumbai, taking hostages in the nation’s first terrorist attack against foreigners.
S&P CNX Nifty Index futures for November delivery dropped 2.4 percent in Singapore, the most since Nov. 19. Contracts that protect against the debt of government-controlled State Bank of India Ltd. rose 15 basis points to 412.5 in Hong Kong, according to Morgan Stanley’s prices, the first increase since Nov. 20, while forwards on the currency that trade outside the country fell 0.3 percent, the first drop in five days.
Stocks, bonds and currencies trading were halted in Mumbai after the assault, which injured 287. The attacks may hurt investor confidence in a country where the global economic slowdown caused the benchmark Bombay Stock Exchange Sensitive Index or Sensex to fall a record 56 percent this year.
“It is worrying that the targets were foreigners and businessmen,” said Ajay Bodke, who helps manage the equivalent of $872 million at IDFC Assets Management Co. in Mumbai. “We will see a ripple effect in terms of investor sentiment as the terrorist attack was in the financial hub and in iconic places. India needs to deal with this with an iron hand.”
Both the Bombay Stock Exchange and National Stock Exchange may resume trading as early as tomorrow, along with bond, foreign exchange, commodities and money markets, bourse officials and the central bank said, without providing further updates.
‘Bounce Back’
The attacks on the Taj Mahal Palace and Tower and Oberoi hotels are increasing concerns among some investors that economic growth is slowing. While Finance Minister Palaniappan Chidambaram last week said economic growth will “bounce back” to 9 percent next year, the International Monetary Fund predicted a 6.3 percent expansion for 2009.
Overseas funds sold a net 3.12 billion rupees ($63 million) of Indian stocks on Nov. 24, increasing outflows from equities this year to $13.5 billion, the nation’s market regulator said.
Nifty futures retreated 64.5 to 2,685 at the close of Singapore trading, after falling as much as 4.9 percent. Most indexes climbed in Asia today, with the MSCI Asia-Pacific Index advancing 1.8 percent.
The futures contract, based on the 50 stocks on the underlying S&P CNX Nifty Index on the National Stock Exchange of India Ltd., added 4.1 percent in Mumbai yesterday.
Reliance, Indiabulls Fall
Shares of Indian companies including State Bank of India and Reliance Industries Ltd. traded overseas fell. Global depositary receipts of the government-owned bank dropped 3.1 percent to 33 euros in Frankfurt trading, a one-month low. Reliance, India’s biggest company by value, slipped 6.7 percent to 33.90 euros.
Among India-linked shares traded in Singapore, Indiabulls Properties Investment Trust fell 11 percent to 16 cents at the close, the biggest drop since Nov. 17. Ascendas India Trust, an owner of industrial properties in India, dropped 7.5 percent to 43.5 Singapore cents. iShares MSCI India, an exchange traded fund, declined 1.9 percent to $3.09, halting three days of gains.
Mark Mobius said Templeton Asset Management remains bullish on Indian stocks after the attacks, on the expectation they will fail to derail expansion.
“It’s possible that once the market opens there will be a number of people who’d want to get out because of what’s happening,” Mobius, who oversees more than $24 billion in emerging-market stocks as chairman at San Mateo, California-based Templeton, said today in a Bloomberg Television interview. “A lot of selling has already taken place so there might not be that much left.”
Infosys, Mercator Rise
Some Indian stocks traded overseas have risen. Infosys Technologies Ltd., second-largest computer-services provider, rose 5.6 percent to 18.74 euros in Frankfurt trading, while Mercator Lines Ltd., the only Indian shipping company to trade in Singapore, gained 3.7 percent to 14 Singapore cents, the highest since Nov. 17.
Non-deliverable forwards on India’s rupee retreated 0.3 percent to 49.90 per dollar. Forwards are agreements in which assets are bought and sold at current prices for delivery at a later specified time and date. Non-deliverable contracts are settled in dollars.
The rupee is the third-worst performer among Asia’s 10 most- active currencies outside Japan after falling 20 percent this year. It gained 1.1 percent to 49.435 per dollar yesterday in Mumbai, according to data compiled by Bloomberg.
‘Knee-Jerk Selling’
The attack “might be an excuse for some knee-jerk selling,” said V. Anantha-Nageswaran, chief investment officer for Asia Pacific at Bank Julius Baer (Singapore) Ltd., which manages $350 billion in assets worldwide. “Our views on India have been cautious even before this, primarily because of the global slowdown, the current account deficit.”
The cost of protecting corporate bonds from default rose in India. Credit-default swaps on ICICI Bank Ltd., India’s second- largest lender, were last quoted 15 basis points higher at 715, according to Morgan Stanley. A basis point, or 0.01 percentage point, is worth $1,000 on a swap protecting $10 million of debt.
India last shut its stock and bond markets in July 2005 after monsoon rains disrupted Mumbai and other areas in the western state of Maharashtra. Trading of shares had been temporarily disrupted in 1993 after a series of explosions in the city killed at least 70 people, the last time the exchange was shut because of a terrorist attack.
Hostages
About 40 people were being held hostage at the hotels, the Press Trust of India reported. A little-known Islamist group called the Deccan Mujahadeen claimed responsibility for the attacks, the report said.
The Sensex has tumbled 57 percent since rising to a record high of 20,873.33 on Jan. 8. The gauge had climbed for the previous six years, on speculation that economic expansion will drive profit growth for the nation’s companies.
India’s 10-year bonds gained yesterday, pushing yields to 7.1 percent, the lowest since January 2006 as a drop in crude oil prices fanned speculation inflation will slow. Takahira Ogawa, a Singapore-based director at Standard & Poor’s, said today the shootings and blasts won’t affect India’s sovereign rating.
Local-currency bonds are the best performers this year among 10 Asian debt markets outside Japan, returning 11.5 percent, according to HSBC Holdings Plc. They are rated BBB- by Standard & Poor’s, the lowest investment grade.
Interest-rate swap rates have almost halved from a record level reached in June. The five-year swap rate, a fixed rate paid to receive a floating rate, fell to 5.74 percent yesterday from a record of 10.57 percent in June. Overnight money-market rates have fallen to less than a third of the 19-month high of 20 percent reached on Oct. 31 as the central bank cut borrowing costs. The Reserve Bank of India has lowered its key repurchase rate by 1.5 percentage points since Oct. 20.
To contact the reporter on this story: Chen Shiyin in Singapore at schen37@bloomberg.net; Pooja Thakur in Mumbai at pthakur@bloomberg.net