Photographer: Scott Eells/Bloomberg Anil Agarwal, chairman of Vedanta Resources Plc. A drop in oil that spurred the best Indian sovereign debt rally in six years wasn’t such good news for resource bonds. Dollar notes of Vedanta Resources Plc (VED), controlled by Indian billionaire Anil Agarwal, are the worst performing this month in a Bank of America Merrill Lynch index of Indian high-yield securities and Standard & Poor’s put the nation’s biggest onshore oil producer on negative credit watch on Jan. 6. Debt due in 2019 of JSW Steel Ltd., owned by the Jindal family, are at 92.4 cents on the dollar from par when they were sold in November. Perpetual dollar bonds of Mukesh Ambani’s Reliance Industries Ltd. lost 1.4 percent last month. Vedanta’s potential downgrade and a spike in its default risk to an 18-month high could make it harder for the company to raise funds and it may have to curb expenditure, S&P said. With Societe Generale SA and Bank of America Corp. saying oil could reach $40-a-barrel and below, fund managers including Aquila & Co. say it isn’t yet time to buy Indian resource bonds. These companies “have to face the reality of getting less money for what they’re doing and paying a higher price for capital,” said Michael Ganske, the London-based head of emerging markets at Rogge Global Partners Plc, which manages about $55 billion of notes. “That’s a normal cyclical pattern, it just came very quick and sharp this time, and investors have no clue where oil is going in the coming months.” bloomberg