Indian stocks and bonds fell after the central bank raised interest rates for the first time in almost two years. Automakers and lenders led the drop.
Indian stocks, the most expensive in the largest emerging markets, retreated as the surprise interest-rate increase hurt financial and consumer shares. India’s 10-year bonds declined. The Bombay Stock Exchange’s Sensitive Index, or Sensex, slid 167.66, or 1 percent, to 17,410.57, its biggest drop in six weeks.
Speculation that countries from China to Brazil will raise borrowing costs next may hurt demand for shares in other developing nations as well, according to Prudential International Investments Advisers LLC. The MSCI Emerging Markets Index has lost 0.1 percent this year, compared with a 1.5 percent gain in the MSCI World Index.
We expect the impact of this rate hike to be relatively bigger on India and other emerging-market stocks,” said John Praveen, the Newark, New Jersey-based chief investment strategist at Prudential International, a unit of Prudential Financial Inc., which oversees $667 billion. “The start of the interest-rate normalization in India is likely to fuel fears of early rate hikes in China, Brazil and other emerging markets.”
Source: Bloomberg(March 22.)
