Most Indian Stocks Decline Ahead of Derivative Contracts Expiry

Most Indian (SENSEX) stocks retreated ahead of the expiry of the derivative contracts for the current month.

Almost two stocks fell for each that rose on the BSE India Sensitive Index, or Sensex, which added 0.1 percent to 20,005 at the close. Volumes on the gauge were 3 percent below the 30-day average. The S&P CNX Nifty Index (NIFTY) of the National Stock Exchange of India Ltd. gained 0.1 percent to 6,055.75 while its January futures, which expire tomorrow, settled at 6,060.30.

Open interest, or the number of outstanding contracts in the Nifty futures, totaled 411,039, compared with 522,724 on Dec. 26, a day before the end of the December series, data compiled by Bloomberg show. Derivative contracts in India expire on the last Thursday of the month. Reliance Industries Ltd. (RIL), the owner the world’s largest refining complex, rose 1.9 percent, ending four days of losses. GAIL India Ltd. (GAIL), the top natural-gas supplier, slid 3.3 percent, the most on the Sensex.

“The trading environment doesn’t have the same buoyancy as it did when the January series began,” Hemant Thukral, head of derivatives at Aditya Birla Money Ltd., said by phone today. “Stocks are expected to be range-bound after the recent rally, with strong foreign flows supporting the market.”

The Sensex has climbed 3 percent in 2013, extending last year’s 26 percent advance, as foreign funds bought shares amid government efforts to reduce subsidies, allow higher foreign investment in retailing and aviation, and hasten infrastructure projects in a bid to revive economic growth.

The Sensex is headed for a third straight month of gains, the longest winning run since September 2010. This month’s net foreign inflows of $3.67 billion have surpassed the previous January record of $2.18 billion set last year, data compiled by Bloomberg show. Foreigners bought $24.5 billion of shares in 2012, the highest among 10 Asian markets tracked by Bloomberg. The Sensex had its biggest annual gain since 2009 last year.

Natural-Gas Prices

GAIL sank 3.3 percent to 339.15 rupees, its lowest close since Nov. 26. There’s speculation the government may increase natural-gas prices, raising production cost at the company’s petrochemical plant in Uttar Pradesh state, said Sujit Lodha, a Mumbai-based analyst at Asian Markets Securities Pvt.

Reliance climbed 1.9 percent to 899.40 rupees after losing 4.4 percent in the past four days. Hindustan Unilever Ltd. (HUVR), a unit of the world’s second-largest consumer-maker, jumped 1.9 percent to 477.45 rupees. Larsen & Toubro lost 1.9 percent to 1,563.75 rupees, the most since Jan. 7. Tata Motors Ltd. (TTMT), the owner of Jaguar Land Rover, fell for a second day, losing 1.7 percent to 299.20 rupees. Tata Power slid 2.9 percent.

Drugmaker Cipla Ltd. rallied 2.5 percent, the most since Nov. 30, to 407.75 rupees.

‘Fully Valued’

The Sensex retreated 0.6 percent yesterday even as the Reserve Bank of India cut its benchmark rate by 25 basis points to 7.75 percent, an outcome predicted by 30 of 35 analysts in a Bloomberg News survey, and lowered the cash reserve ratio to 4 percent from 4.25 percent. The 30-stock gauge is valued at 15.9 times estimated earnings, the highest reading since February last year, data compiled by Bloomberg. The MSCI Emerging Markets Index (MXEF) trades at 11 times.

“Indian equities are at a crossroads,” Manishi Raychaudhuri and Gautam Mehta, analysts at BNP Paribas SA, wrote in a report released Jan. 29. “On the one side there are potential catalysts for further upward movement. On the other, India appears fully valued relative to its own history and slightly overvalued relative to peers in Asia.”

India VIX, which gauges the cost of protection against losses in the Nifty, fell 0.6 percent to 14.38, data compiled by Bloomberg show.

To contact the reporter on this story: Shikhar Balwani in Mumbai at sbalwani@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

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