India’s Sensex Drops for Second Day as Industrials, Lenders Fall

India’s benchmark stock index fell for the second day, led by industrials and energy companies.

Turbine producer Bharat Heavy Electricals Ltd. (BHEL) posted the biggest two-day drop in eight weeks, sending a gauge of capital goods producers to a one-week low. Oil & Natural Gas Corp., the nation’s largest explorer, retreated 2.1 percent. State Bank of India was the worst performer on a measure of 13 lenders.

The S&P BSE Sensex slid 0.4 percent to 21,171.41 at the close, trimming an intraday drop of 0.9 percent in the last half hour of trade. The gauge climbed to a record on Dec. 9, driving up valuations to a five-week high, after the Bharatiya Janata Party won the state polls, giving it momentum to end the ruling Congress party’s decade-long rule in general elections due by May and install Narendra Modi as prime minister.

“The market is near an all-time high and some amount of consolidation is being seen,” Paras Bothra, vice president for equity research at Ashika Stock Broking Ltd. in Mumbai, said by phone. “Stocks are fairly valued in the near term.”

Bharat Heavy slid, taking the two-day loss to 5.6 percent, the most since Sept. 30. Engineering company Larsen & Toubro Ltd. (LT) slid 1.8 percent to 1,080.6 rupees, the lowest level since Dec. 4. Tata Motors Ltd., owner of Jaguar Land Rover, lost 3.3 percent, the worst performer on the Sensex.

Oil & Natural Gas declined 2.1 percent to 291.8 rupees. State Bank fell, taking its two-day loss to 5 percent.

Coal India Ltd. (COAL) rose 1.1 percent, erasing a 3.8 percent intraday drop, after the world’s largest producer of the fuel challenged a local antitrust body’s imposition of a 17.7-billion rupee ($288 million) penalty.

Fed, RBI Meetings

Equities also declined ahead of November retail inflation and October factory output data due tomorrow. Investors also trimmed their holdings before policy meetings by the Reserve Bank of India and the U.S. Federal Open Market Committee on Dec. 18, Akash Dharia, head of derivatives at ICICI Securities Ltd., said by phone from Mumbai.

Reserve Bank of India Governor Raghuram Rajan may increase the repurchase rate to 8.5 percent next year from 7.75 percent, Goldman Sachs Group Inc. said Nov. 21. He has raised borrowing costs twice since he moved to the central bank in September to cool inflation. The Fed may begin paring an $85 billion-a-month bond buying program at its Dec. 17-18 meeting, according to 34 percent of economists surveyed by Bloomberg, up from 17 percent in a Nov. 8 survey.

The rupee pared an intraday decline of 0.6 percent after government data showed today that India’s (SENSEX) imports declined 16.4 percent in November, helping narrow the trade deficit.

Rupee Volatility

“The trade balance is improving and that means the rupee may be less volatile than it was in August when the Fed starts to taper its stimulus,” Amit Agrawal, a Bangalore-based strategist at Societe Generale SA (GLE), said in an interview. The rupee touched a record low of 68.845 per dollar on Aug. 28.

The Sensex has climbed 9 percent this year, the best performer among the four largest emerging markets, as growing exports boosted company earnings and stimulus from the Fed spurred foreign funds to pour $18.5 billion in domestic shares. That’s the biggest inflow in Asia after Japan, data compiled by Bloomberg show. The Sensex is valued at 13.8 times projected 12-month earnings, compared with the MSCI Emerging Markets Index’s 10.5 times.

The CNX Nifty (NIFTY) Index on the National Stock Exchange of India Ltd. declined 0.4 percent to 6,307.90. The India VIX, a gauge of options prices on the Nifty, fell 2.5 percent.

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

To contact the editor responsible for this story: Michael Patterson at mpatterson10@bloomberg.net

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