Reliance Infrastructure, Tata Steel Lead Retreat as India's Stocks Decline

India’s stocks fell as investors speculated yesterday’s biggest one-day advance in ten months may have exceeded the outlook for earnings.

Reliance Infrastructure Ltd., the builder of a mass rapid transit system in Mumbai, declined 5 percent after surging 8.8 percent yesterday. Tata Steel Ltd., the nation’s biggest producer of the alloy, dropped 3.2 percent. The stock climbed the most in 11 months yesterday after European policy makers announced a loan package to counter the region’s debt crisis.

“Investors want to cool down a bit,” said Ashwin Gada, who heads a branch of Networth Stock Broking Ltd. in Mumbai. “There was a lot of euphoria yesterday on the bailout package. They will wait to buy stocks at lower levels.”

The Bombay Stock Exchange’s Sensitive Index, or Sensex, fell 189.02, or 1.1 percent, to 17,141.53. The gauge advanced 3.4 percent yesterday, its biggest one-day climb since July 17. The S&P CNX Nifty Index on the National Stock Exchange lost 1.1 percent to 5,136.15. The BSE 200 Index retreated 1.2 percent to 2,167.87.

Reliance Infrastructure slid 5 percent to 1,011 rupees. Tata Steel dropped 3.2 percent to 582.05 rupees.

India’s Sensex index trades at 16.5 times this year’s earnings estimates, higher than the 12.4 multiple of Brazil’s Bovespa index and 7.3 times for Russia’s Micex index. China’s Shanghai Composite Index trades at 15.5 times earnings.

Risk Averse

India’s rupee fell against the dollar, extending this month’s losses, on speculation increased volatility in global stocks will spur investors to favor the perceived safety of the U.S. currency over emerging-market assets. India’s National Stock Exchange Volatility Index touched 27.4 on May 7, the highest level since Feb. 26.

“The dollar is still strong and stocks are weak, indicating that risk aversion continues,” said Jaiprakash Israni, a currency trader in Mumbai at state-owned Andhra Bank.

Infosys Technologies Ltd., the second-largest software services provider, lost 0.6 percent to 2,660.75 rupees, while larger rival Tata Consultancy Services Ltd. fell 1.8 percent to 756.3 rupees. Wipro Ltd., the third-biggest, dropped 0.6 percent to 668.05 rupees. Indian software exporters get at least a fifth of their revenue from Europe.

“We are concerned on the sovereign debt situation,” said Ajay Argal, who helps manage about $9.2 billion in assets at Birla Sun Life Asset Management Co. in Mumbai. “Most developed countries need to borrow a lot from the markets. That means less money would be available for the private sector and, to that extent, growth will slow down.” Argal said he’s avoiding shares of telecom companies, while declining to name any.

Reliance Communications

Reliance Communications Ltd., India’s second-largest mobile-phone operator, sank 4.8 percent to 146.85 rupees, while larger rival Bharti Airtel Ltd. fell 3.3 percent to 284.7 rupees. Idea Cellular Ltd. plunged 5 percent to 59.85 rupees.

Sterlite Industries (India) Ltd., the largest copper and zinc producer, dropped 2.9 percent to 734.2 rupees. Hindalco Industries Ltd., the biggest aluminum producer, declined 3.1 percent to 169.95 rupees.

Overseas investors sold a net 15.9 billion rupees ($348.8 million) of Indian equities on May 7, reducing their total purchases of stocks this year to 269.7 billion rupees, according to the nation’s market regulator.

Inflows from overseas reached a record 834.2 billion rupees in 2009, exceeding the high set two years earlier in domestic currency terms, as the biggest rally in 18 years lured foreign funds. They sold a record 529.9 billion rupees of shares in 2008, triggering a record annual decline.

The following were among the most active on the exchange:

Bajaj Hindusthan Ltd. (BJH IN) sank 6.7 percent to 108.8 rupees. India’s biggest sugar producer reported net income fell 61 percent to 317.9 million rupees in the second quarter ended March 31 from a year earlier, according to a statement to the Bombay Stock Exchange today.

Godrej Consumer Products Ltd. (GCPL IN) advanced 2 percent to 304.85 rupees. The country’s second-biggest soap maker was raised to “outperform” from “underperform” by Sweta Jain, an analyst at Batlivala & Karani Securities Pvt.

To contact the reporter on this story: Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net

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