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Indian Stocks Fall; Benchmark Sensex Posts Biggest Weekly Drop in 3 Months
Indian stocks fell, driving the benchmark index to its biggest weekly decline in three months, amid concern the U.S. will lower its second-quarter growth estimate.
Infosys Technologies Ltd., which gets two-thirds of sales from North America, led declines among software companies after an survey showed the U.S. economy probably slowed in the second quarter even more than initially estimated. DLF Ltd., biggest developer, dropped the most in 12 weeks.
“The continuous flow of negative news from the U.S. is a cause of worry as the U.S. still remains the engine of global growth,” said Sadanand Shetty, a Mumbai-based fund manager at Taurus Asset Management Co., which manages $640 million in assets. “Risk aversion may cause a short-term fund outflow.”
The Bombay Stock Exchange’s Sensitive Index, or Sensex, dropped 227.94, or 1.3 percent, to 17,998.41. The index dropped 2.2 percent this week, the most since the week ended May 21. The S&P CNX Nifty Index on the National Stock Exchange dropped 1.3 percent to 5,408.7. The BSE 200 Index retreated 1.1 percent to 2,309.07.
The U.S. economy probably slowed in the second quarter as companies reined in inventories and the trade deficit widened, economists said before a report today. Growth cooled to a 1.4 percent pace from April through June, the smallest gain in the year-old recovery, rather than the 2.4 percent projected last month, according to the median forecast of 81 economists surveyed by Bloomberg News.
Infosys, Tata
Infosys, the second-largest software services provider, decreased 2 percent to 2,709.9 rupees, while larger rival Tata Consultancy Services Ltd. fell 2.3 percent to 856.05 rupees. Wipro Ltd., the third-biggest, lost 0.7 percent to 396.95 rupees. Indian software exporters get about half of their revenue from the U.S.
DLF lost 3.5 percent to 306.85 rupees, its steepest slide since June 7.
Oil & Natural Gas Corp., the nation’s largest explorer, climbed 2.2 percent to 1,318.2 rupees after the company discovered oil in a block in the western onshore basin, according to an e-mailed statement yesterday. Separately, the company is examining all legal and contractual implications of Vedanta Resources Plc’s proposal to acquire a majority stake in Cairn India Ltd., Sharma said in New Delhi yesterday.
Taurus’s Shetty is betting on shares of consumer, infrastructure and oil and gas companies to outperform the benchmark index. Increased domestic consumption, record infrastructure spending and government’s efforts to end price controls will drive gains in such companies, he said.
Bharat Petroleum
Bharat Petroleum Corp., second-biggest state refiner, added 1.7 percent to 776.4 rupees. India freed gasoline prices from government control in June and plans to eventually allow state refiners, including Indian Oil Corp., the nation’s biggest, to set diesel rates. Indian Oil shares climbed 1.6 percent to 410.25 rupees. Hindustan Petroleum Corp. added 1.2 percent to 531.8 rupees.
Foreign fund inflows to India’s equities have climbed 62 percent this year, making the Sensex the most expensive benchmark index in Asia and among the BRIC markets that also comprise Brazil, Russia and China. The Sensex is trading at 17.7 times estimated profit after extending last year’s biggest rally in 18 years.
“The concern for Indian stock markets is that risk aversion among foreign investors may spook the rally here,” said Kishor Ostwal, managing director of CNI Research (India) Ltd., an equities research provider in Mumbai.
Overseas funds sold a net 2.9 billion rupees ($61.9 million) of Indian equities on Aug. 25, paring total investments in stocks this year to 592.8 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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