Indian stocks fell, with the benchmark index snapping five weeks of gains that took it close to a record high.
Tata Steel Ltd., the biggest producer, led the decline, retreating 3.6 percent as commodity prices dropped. HDFC Bank Ltd., the third-largest lender, dropped for the second day after being downgraded by BNP Paribas SA. Mahindra & Mahindra Ltd., the biggest maker of sport-utility vehicles and tractors, declined 2.8 percent.
The Bombay Stock Exchange’s Sensitive Index, or Sensex, fell 65.06, or 0.3 percent, to 20,250.26 as of the 3:30 p.m. close in Mumbai. The measure declined 1 percent this week, ending its longest stretch of weekly gains since April.
The Sensex has gained 26 percent from a May 25 low, approaching the record closing high of 20,873.33 on Jan. 8, 2008. The gauge is the best performer this year among the world’s 10 biggest stock markets. The measure climbed 12 percent last month, the most since May 2009.
“We have increased the cash allocation across some portfolios,” said Manish Sonthalia, who manages the equivalent of $270 million in equities at Motilal Oswal Securities Ltd. in Mumbai. “We expect a 5 percent to 8 percent correction in the markets.” Sonthalia said he’s “taking some profit off the table” in shares of consumer and automobile companies, which have “run up big time.”
The S&P CNX Nifty Index on the National Stock Exchange retreated 0.3 percent to 6,103.45. The BSE 200 Index lost 0.4 percent to 2,578.42.
Foreign fund inflows to India’s equities have increased 62 percent this year, making the benchmark index the most expensive among the world’s 20 largest stock markets, according to data compiled by Bloomberg. Stocks on the Sensex are valued at 19.1 times earnings, compared with 13.4 times for Brazil’s Bovespa Index, 7.8 times for Russia’s Micex Index and 15.6 times for China’s Shanghai Composite Index, among the so-called BRIC markets.
Tata Steel lost 3.6 percent to 626.6 rupees. Sterlite Industries (India) Ltd., the largest copper producer, fell 1.1 percent to 174 rupees. The London Metal Exchange Index of six metals including aluminum and copper dropped 2.3 percent yesterday, the steepest decline since July 16.
‘Tug of War’
HDFC Bank decreased 1.1 percent to 2,405.75 rupees. The stock was cut to “hold” from “buy” by Vijay Sarathi, an analyst at BNP Paribas. The brokerage set a 12-month price estimate of 2,400 rupees per share. Mahindra & Mahindra lost 2.8 percent to 705.05 rupees. Tata Motors Ltd., the biggest truckmaker and owner of Jaguar Land Rover, declined 2.3 percent to 1,102.95 rupees.
“It’s a tug of war,” said Alex Mathews, head of research at Geojit BNP Paribas Financial Services Ltd. in Kochi. “Investors who entered the markets early have made big gains; they want to book some profit. Those who missed the rally want to get in as long-term growth is intact.”
Cipla Ltd., the nation’s third-biggest drugmaker by sales, gained 1.8 percent to 337.2 rupees after Hindu Business Line newspaper reported India settled a dispute with the European Union over the seizure of generic drugs. Ranbaxy Laboratories Ltd., the biggest, increased 1.5 percent to 586.15 rupees.
India will withdraw a complaint to the World Trade Organization, the newspaper said, citing Anand Sharma, the nation’s trade minister. The companies get most of their sales abroad.
Ranbaxy spokesman Krishnan Ramalingam wasn’t immediately able to comment on the report. S. Radhakrishnan, chief financial officer of Cipla couldn’t immediately be reached for comment on their cell phones.
Overseas funds bought a net 22.9 billion rupees ($515.9 million) of Indian equities on Oct. 7, extending this year’s record inflows to 962.5 billion rupees, according to the nation’s market regulator.