Tata Consultancy Leads Drop as India's Sensex Declines for a Second Day

India’s benchmark stock index fell for the second day from the highest level in 30 months as some investors judged recent gains as overdone relative to the earnings outlook.

Tata Consultancy Services Ltd., the largest software services exporter, fell 1.5 percent. The stock is trading at 21.5 times estimated profit, compared with the 17.1 times for the Sensex. DLF Ltd., the biggest developer, lost 1 percent, dropping for the first day in five. Mahindra & Mahindra Ltd. climbed after a newspaper reported it will build a factory to produce tractors.

“Investors are focusing on specific stocks as the broader market is overvalued,” said Alex Mathews, head of research at Geojit BNP Paribas Financial Services Ltd. in Kochi. “The demand outlook for the auto sector remains strong. It is a good sign that companies are increasing capacities.”

The Bombay Stock Exchange’s Sensitive Index, or Sensex, fell 28.84, or 0.2 percent, to 18,143.99, erasing an earlier gain of as much as 0.4 percent that took it to the highest level since February 2008. The gauge has climbed 1.5 percent this week.

The S&P CNX Nifty Index on the National Stock Exchange lost 0.1 percent to 5,439.25. The BSE 200 Index retreated 0.1 percent to 2,311.27.

Expensive

Tata Consultancy dropped 1.5 percent to 864.7 rupees. The stock had soared 5.5 percent in the previous two trading sessions. DLF lost 1 percent to 307.7 rupees, trimming its advance this week to 2.1 percent.

Foreign fund inflows to India’s equities have climbed 46 percent this year, making the Sensex the most expensive in Asia, excluding Japan, and the BRIC markets, which include China, Brazil and Russia.

Mahindra rose 0.5 percent to 648.75 rupees. The company plans to spend as much as 18 billion rupees ($390 million) to set up a tractor-building plant in the south Indian state of Tamil Nadu, Business Standard reported, citing Pawan Goenka, president of the automotive and farm equipment unit. Goenka didn’t answer a call to his cell phone seeking comment.

Tata Motors Ltd., the maker of the world’s cheapest car, the Nano, surged 3.8 percent to 893.7 rupees, its highest level since January 2007. India’s direct tax collection between April and July rose 16 percent, about five times faster than in the year earlier period.

‘Magic Bullet’

India’s direct tax collection between April and July climbed to 856.5 billion rupees from 739.9 billion rupees a year earlier, the country’s finance ministry said yesterday. Corporate tax collections increased 21 percent. Total levies collected rose 3.3 percent a year earlier.

“The increased tax collection shows that people will have more money to spend and invest,” said Mathews.

State Bank of India, the biggest lender, dropped 1 percent to 2619.35 rupees. The Reserve Bank of India has no “magic bullet” to manage growth and curb inflation and monetary policy is “the first line of defense” against inflation, Governor Duvvuri Subbarao said yesterday.

Essar Shipping jumped 6.2 percent to 115.4 rupees, its highest close since August 2008. The nation’s second-largest marine transport company by market value advanced after raising $280 million selling convertible bonds to its parent to buy ships and expand ports.

Going Digital

Hathway Cable & Datacom Ltd., India’s largest cable- television operator, surged 8.6 percent to 211.95 rupees after the Telecom Regulatory Authority of India fixed a date for service providers to migrate to digital cable TV.

TRAI, as the regulator is known, yesterday set deadlines of Dec. 31, 2013, for service providers to migrate analog cable customers to digital cable TV.

DEN Networks Ltd. rose 12 percent to 237.25 rupees. Wire and Wireless India Ltd. added 9.3 percent to 15.35 rupees, while Dish TV India Ltd. jumped 6.3 percent to 49.8 rupees.

Overseas funds bought a net 7.42 billion rupees of Indian equities on August 4, the 22nd straight day that purchases have exceeded sales, raising their total investments in the stocks this year to 510.2 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 ago in local currency terms, as the biggest advance in 18 years lured foreign funds. They sold a record 529.9 billion rupees of shares in 2008, triggering a record annual decline.

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

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