Sensex Drops Most in Asia Amid Earnings Growth Concern; Wipro Shares Fall
India’s benchmark stock index fell the most among Asian markets today amid concern rising inflation and interest rates will dent corporate earnings.
Wipro Ltd. (WPRO), the nation’s third-biggest software exporter, plunged to the lowest in almost 11 months after saying net income was little changed in the three months ended June 30. Dr. Reddy’s Laboratories Ltd., the second-biggest drugmaker, dropped the most in two weeks after reporting first quarter earnings in line with analyst estimates.
“Weak corporate earnings and forecasts are not giving investors the confidence to put their money on the table,” said Arun Kejriwal, a director at Kejriwal Research & Investment Services Pvt. in Mumbai. “The positive mood from the U.S. and other world markets have been spoilt by Wipro’s numbers.”
The Bombay Stock Exchange Sensitive Index, or Sensex, lost 151.49 points, or 0.8 percent, to 18,502.38 at the 3:30 p.m. close in Mumbai. The S&P CNX Nifty Index on the National Stock Exchange of India Ltd. fell 0.8 percent to 5,567.05 and its July futures settled at 5,565.90. The BSE 200 Index slipped 1 percent to 2,297.34.
U.S. and most Asian equities rallied after President Barack Obama endorsed a deficit-cutting proposal by a bipartisan group of senators, easing concerns that a short-term default by America may derail the global economic recovery.
The Sensex has declined 9.8 percent this year, the second- worst performer among benchmark indexes of the world’s 10 biggest markets, amid interest-rate increases. Three out of six Sensex companies that have reported earnings for the quarter ended June 30 have fallen short of analyst estimates as rising borrowing costs damped demand.
Wipro Forecast
Wipro sank 3.9 percent to 398.95 rupees, its lowest close since August 30. The company said net income was little changed at 13.3 billion rupees ($299 million) in the fiscal first quarter ended June 30, meeting analyst estimates, and forecast revenue from computer services may rise as little as 2 percent as clients hold off from outsourcing larger projects.
“For the second quarter, which is typically the strongest for all the IT companies, they’ve guided for slower growth than their peers,” said Vihang Naik, an analyst at MF Global Sify Securities Pvt.
Dr. Reddy’s fell 2.1 percent to 1,566.55 rupees, its steepest slide since July 6. The company reported first-quarter profit of 2.63 billion rupees compared with analyst estimates of 2.68 billion rupees.
LIC Housing
LIC Housing Finance Ltd. (LICHF), the home-loan arm of India’s largest insurer, plunged 3.3 percent to 216.7 rupees after it reported first-quarter profit of 2.57 billion rupees, less than the 2.81 billion rupees estimated by analysts.
Companies on the Sensex may report a profit growth of 12 percent to 14 percent in the year to March 2012, less than the consensus estimate of 17 percent, Rakesh Arora, head of research at Macquarie Capital Securities (India) Pvt., said in a July 18 interview. Bank of America Merrill Lynch lowered its profit estimate for Sensex companies to 17 percent from 21 percent, Jyotivardhan Jaipuria, head of India research, said yesterday.
Hero Honda Motors Ltd. (HH), India biggest motorcycle maker, shed 2 percent to 1,756.9 rupees ahead of its quarterly earnings report tomorrow. Tata Motors Ltd. (TTMT), the biggest truckmaker and owner of Jaguar Land Rover, slid 1.5 percent to 968.85 rupees.
Jaiprakash Associates Ltd. (JPA), a builder of dams, roads and bridges, retreated 2.5 percent to 75.75 rupees. Hindalco Industries Ltd. (HNDL), the second-biggest aluminum producer, fell 3.1 percent to 178.8 rupees. Companies on the Sensex are valued at 14.8 times estimated earnings, compared with 10.9 for the MSCI Emerging Markets Index.
RBI Meeting
India’s inflation quickened to 9.44 percent in June from 9.06 percent in May, the government said on July 14. The rate was less than the 9.68 percent median estimate of 28 economists in a Bloomberg News survey. India has persisted with the most aggressive monetary tightening among Asia’s major economies even as regional neighbors from Malaysia to the Philippines held borrowing costs steady in recent weeks to protect growth.
The Reserve Bank of India meets on July 26 to set policy after raising rates 10 times since March last year to rein in accelerating price gains.
State Bank of India (SBIN), the largest lender, paced decline among peers after Montek Singh Ahluwalia, the deputy chairman of India’s planning commission, said it will take several months to reduce inflation to “an acceptable level.”
Banks Slide
State Bank slid 1.6 percent to 2,471.4 rupees, paring a five-day 4.7 percent gain. ICICI Bank Ltd. (ICICIBC), the second-biggest lender, retreated 1.6 percent to 1,045.35 rupees. HDFC Bank Ltd. (HDFCB), the third-biggest, lost 1.5 percent to 503.1 rupees and its July futures settled at 503.65 rupees.
“We will bring inflation down in control but it will take several months,”Ahluwalia, Prime Minister Manmohan Singh’s top economic aide, said yesterday.
Overseas funds sold a net 527 million rupees of Indian equities on July 18, paring their investment in stocks this year to 92.4 billion rupees, according to data on the website of the Securities and Exchange Board of India.
To contact the reporter on this story: Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net
To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net
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