Stocks drop on rupee, Spain concerns

Indian stocks declined for the first time this week after the rupee weakened and as Spain's central bank said the country's economic outlook is worsening. Tata Motors Ltd. plunged the most in more than three years after its main Jaguar Land Rover unit posted profit that missed analysts' estimates. DLF Ltd., the biggest developer, fell to a two-week low before its earnings today. The BSE India Sensitive Index dropped 0.8 per cent to 16,312.15 at close. The gauge lost 5.8 per cent this month, poised for its worst May performance since 2006. Spain's borrowing costs rose yesterday after its central bank said the economy will sink further into recession, fuelling concern the debt crisis will worsen in Europe, India's biggest trading partner. The rupee approached a record low, after Oil Minister S. Jaipal Reddy yesterday said the nation doesn't plan to raise prices of subsidised fuels. "Weakness in the rupee is causing foreign investors to sell some of their holdings," Sampath Reddy, who manages $7 billion as chief investment officer at Bajaj Allianz Life Insurance Co., said. Offshore funds have cut holdings of local shares by $210 million this month, data show. The Sensex has fallen 11.5 per cent from its February 21 high, exceeding the 10 per cent slump that signals a correction to some investors. The measure trades at 12.7 times estimated earnings, near the lowest level in more than three years. That compares with a multiple of 9.8 times for the MSCI Emerging Markets Index.