Indian Stocks Decline as Valuations Increase to 20-Month High

Indian (SENSEX) stocks fell after valuations on the benchmark index increased to a 20-month high. Carmakers, metal and real estate shares led the retreat.

The BSE India Sensitive Index, or Sensex, lost 0.5 percent to 19,932.03, according to preliminary closing prices. The BSE Mid-Cap Index tumbled 2.6 percent as 34 stocks sank more than 5 percent each. The BSE India Realty Index lost 4.3 percent. Tata Motors Ltd. (TTMT) fell the most since May after its Jaguar Land Rover Plc unit said profit growth stalled. Copper producer Sterlite Industries (India) Ltd. (STLT) and aluminum maker Hindalco Industries Ltd. (HNDL) plunged 3 percent each.

The Sensex advanced 3 percent this year through yesterday, pushing up valuations to 16.8 times reported earnings, the most expensive since May 2011. The International Monetary Fund pared its 2013 estimate for India to 5.9 percent from 6 percent, the Washington-based lender said in a report yesterday.

“The growth momentum has to pick up before new investors come in as the existing story is probably reasonably valued,” Anand Tandon, chief executive officer of JRG Securities Ltd., told Bloomberg TV India today.

Finance Minister Palaniappan Chidambaram is on a tour of Asia and Europe to woo investors. He pledged to deepen a policy overhaul that lured foreigners to invest $24.5 billion into domestic shares last year, the most among the 10 Asian markets tracked by Bloomberg, excluding China. The inflows helped fuel the biggest annual increase in the Sensex since 2009.

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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