Sensex drops on rail freight hike

Winding up of positions on the final day of trading in February derivatives contribute to declines

Indian stocks dropped the most in two weeks as metals and cement producers retreated after the government raised freight costs in its annual railway budget.

Hindalco Industries Ltd and Steel Authority of India Ltd fell at least 2.5 per cent, sending a gauge of metalmakers to a two-week low. UltraTech Cement Ltd decreased the most in seven weeks. Kalindee Rail Nirman (Engineers) Ltd fell 4.4 per cent.

The S&P BSE Sensex lost 0.9 per cent to 28,746.65, the most since February 9. Railway Minister Suresh Prabhu raised tariffs on cement, coal and foodgrains by as much as 10 per cent to collect Rs40 billion ($649 million) a year, but spared passengers from an increase in fares. The winding up of positions on the final day of trading in February derivatives contributed to the declines.

“Structurally, it is a good budget, but the markets are not looking at a three-tofour year time frame, and the expiry is around the corner,” Mayuresh Joshi, head of institutional sales at Angel Broking Ltd in Mumbai, told Bloomberg TV India yesterday. “People were expecting lot of railway projects ... The hike in freight proved to be a dampener.”

Hindalco slid 2.5 per cent. Steel Authority tumbled 3.4 per cent and Tata Steel Ltd fell 1.6 per cent in a fifth day of losses. Sesa Sterlite Ltd lost 1.2 per cent, dragging down the S&P BSE India Metal Index to its lowest level since February 12.

UltraTech Cement, ACC Ltd and Grasim Industries Ltd, the nation’s largest cement makers, fell by as much as 2.2 per cent. Bharat Heavy Electricals Ltd, the biggest powerequipment maker, plunged 3.6 per cent.

Companies catering to the railways declined even as the minister proposed a review of the wagon-making programme to make it attractive for private companies.

Slide in Bharat Heavy Electricals Ltd.

Railroad stocks

Kalindee Rail retreated 4.4 per cent to its lowest price since January 21, taking the week’s loss to 16 per cent. The stock rallied 12 per cent in the four weeks through Sunday.

Titagarh Wagons Ltd added 0.4 per cent after falling as much as 7.5 per cent earlier.

Traders replaced higherthan-average February CNX Nifty Index futures with the next month’s series at the expiry. The rollover rate jumped to 77 per cent as of 3.42pm in Mumbai as investors swapped current-month futures with March contracts. That compares with a six-month closing average of 71 per cent on expiry, according to data compiled by Bloomberg.

The Sensex has risen 4.5 per cent this year amid optimism Prime Minister Narendra Modi’s first full-year budget tomorrow will announce steps to improve infrastructure, boost local manufacturing and reduce food subsidies. The gauge trades at 16.2 times projected 12-month profits, a 13 per cent premium to the fiveyear average.