India’s Nifty Futures Decline on Earnings as Volatility Climbs

Indian (SENSEX) stock-index futures dropped on concern corporate earnings may miss forecasts, even after the nation’s biggest company reported a 22 percent rise in profit, and as volatility (RIL) rose to a 10-month high.

SGX CNX Nifty Index futures for April delivery fell 0.4 percent to 5,680 at 10:04 a.m. in Singapore. The underlying CNX Nifty (NIFTY) Index was unchanged at 5,688.70 yesterday. The S&P BSE Sensex index fell 0.1 percent. The Bank of New York Mellon India ADR Index of U.S.-traded shares lost 1.4 percent.

Net incomes for the 30 Sensex companies in the quarter ended March 31 may fall 0.8 percent from a year ago, the first drop in three years, according to estimates compiled by Bloomberg. Tata Consultancy Services Ltd. (TCS), India’s biggest company by market capitalization, reported net income for the quarter ended March 31 rose to 36 billion rupees ($665 million), signaling demand for outsourced software services remains buoyant. The Sensex’s 15-day volatility measure, a gauge of price swings, climbed to the highest since June.

“The volatility in large-cap stocks is worrisome,” Andrew Holland, chief executive officer of investment advisory at Ambit Capital Pvt. in Mumbai., said in an interview with Bloomberg TV India yesterday. “Maybe with the Reserve Bank of India’s help, we can see a clear path towards lower interest rates.”

Volatility Rising

Tata Consultancy’s 15-day volatility measure held near a 3- month high yesterday, while the gauge for Oil & Natural Gas Corp., the country’s second-biggest company, was at a six-week high. Volatility in shares of Reliance Industries Ltd. and ITC Ltd. (ITC), the third- and fourth-largest companies, is the most elevated since October.

The central bank meets on May 3 to set monetary policy, after cutting its benchmark interest rate in March for the second time this year. A recent rout in gold prices, combined with a decline in crude oil, may help damp inflation and narrow India’s record current-account deficit, boosting scope for a further reduction in interest rates.

Foreign funds bought a net $117.6 million of Indian shares on April 16, data compiled by Bloomberg show, taking net investment in stocks this year to $10.2 billion, a record for the period, according to data compiled by Bloomberg. Inflows last year totaled $24.5 billion, the most among 10 Asian markets tracked by Bloomberg.

The Sensex has dropped 3.6 percent this year and is valued at 12.6 times projected 12-month profits, compared with this year’s peak of 13.8 times in January. The MSCI Emerging Markets Index trades at 10.1 times.

To contact the reporter on this story: Santanu Chakraborty in Mumbai at schakrabor11@bloomberg.net

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

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