Mumbai: Indian stocks declined after the benchmark index's biggest rally in more than four years drove valuations to their highest level in seven weeks.
Oil & Natural Gas Corporation slid 2.8 per cent, ending a four-day rally which was the biggest since May 2009. Hindustan Unilever declined 2.2 per cent, sending a measure of 11 consumer-goods companies to its first drop in five days.
ICICI Bank, the second-biggest lender by assets, retreated the most in a week.
The S&P BSE Sensex lost 1 per cent to 19,790.06 in Mumbai. The gauge surged 3.8 per cent on Tuesday, the most since May 2009, pushing up its valuation to 14.2 times estimated 12-month earnings, the highest since July 23.
The rupee fell as much as 0.6 per cent, halting the biggest four-day surge since 1973, amid concern slowing growth, the highest interest rates among major Asian economies and consumer prices running near double digits will deter inflows needed to pare the current account deficit.
"There are still headwinds in terms of growth, interest rates and inflation," Mahesh Patil, co-chief investment officer at Birla Sun Life Asset Management, which has $13.8 billion in assets, said on Bloomberg TV India yesteroday. "We would start to be cautious at these levels."
Oil & Natural Gas fell to Rs284. The stock surged 17 per cent in the past four days, the biggest gain since May 2009.
Hindustan Unilever dropped 1.9 per cent to Rs641, the most since September 3. The S&P BSE Fast-Moving Consumer Goods Index dropped 1.3 per cent, ending a four-day, 8.8 per cent rally. ICICI Bank lost 1.2 per cent to Rs957 and HDFC Bank fell 0.5 per cent to Rs635, the most since September 3.
The Sensex and the rupee have rallied the past week after new Reserve Bank of India Governor Raghuram Rajan announced a package of measures that Barclays estimated may lure $10 billion in foreign-exchange inflows. Brent oil fell the most since June 20 yesterday as the United States Senate backed away from a vote authorising a military strike against Syria.
Falling crude costs and a strengthening currency reduces pressure on the nation's public finances. Standard & Poor's reiterated last week it may cut India's BBB- credit rating to junk because of the government's failure to tackle its fiscal and current-account deficits.
Foreign funds pulled $3.7 billion from domestic equities in the three months ended August, the highest since the global financial crisis in 2008, fueling the rupee's slide and worsening the current-account shortfall."Funding the current-account deficit is a big challenge," Birla Sun Life's Patil said.
The Sensex has increased 2.3 per cent this year in local currency terms and is valued at 14.1 times projected 12-month earnings. It has lost 12 per cent this year in dollar terms. The MSCI Emerging Markets Index is valued at 10.5 times.