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Indian Stocks Decline; Reliance Leads Retreat on Earnings Report

Reserve Bank of India Governor Duvvuri Subbarao
Duvvuri Subbarao, governor of the Reserve Bank of India (RBI), said Inflation must ease before interest rates can be reduced. Photographer: Adeel Halim/Bloomberg

Indian stocks declined, led by Reliance Industries Ltd. after the September quarter profit at the nation’s most valuable company was little changed from the previous three months.

Reliance tumbled the most in three weeks. Tata Consultancy Services Ltd., the largest software maker, paced losses among peers before its earnings today. Tata Motors Ltd., the owner of Jaguar Land Rover, climbed to its highest level in more than two months after global sales rose 24 percent last month.

The BSE India Sensitive Index, or Sensex, dropped 57.60, or 0.3 percent, to 17,025.09 at the 3:30 p.m. close in Mumbai. The measure gained 5.2 percent last week, the most since the period ended Sept. 2, as Infosys Ltd., the second-biggest software exporter, reported profit that beat forecast.

“Investors are watching the earnings season closely for a clear cut direction,” said Kaushik Dani, a Mumbai-based fund manager at Peerless Mutual Fund, which manages $1.2 billion in assets. “Global factors have stabilized for the past few days and it’s time to access the impact of macro numbers on company earnings.”

The Sensex has declined 15 percent this year amid concern interest-rate increases to curb price increases may compound the effects of Europe’s debt crisis and slowing economic growth in the U.S. on corporate profits. Earnings for 47 percent of Sensex companies missed analyst estimates in the three months ended June, according to Bloomberg data. That compares with 33 percent that lagged behind forecasts in the previous quarter.

Europe Plan

Asian stocks rose today, extending the biggest weekly gain since March on the region’s benchmark index, after Group of 20 finance chiefs meeting in Paris endorsed parts of a plan to contain Europe’s debt crisis.

The S&P CNX Nifty Index on the National Stock Exchange of India Ltd. dropped 0.3 percent to 5,118.25. Its October futures settled at 5,122. The BSE-200 Index decreased 0.3 percent.

Reliance retreated 3.8 percent to 833.8 rupees, the most since Sept. 22. Profit in the quarter ended September rose 16 percent to 57.03 billion rupees ($1.16 billion) from a year ago, the Mumbai-based company said Oct. 15. That matched the median estimate of 22 analysts surveyed by Bloomberg.

Reliance, controlled by billionaire Mukesh Ambani, may earn less from every barrel of oil processed at its Jamnagar complex, the world’s largest, as global refining capacity tops growth in fuel demand. The company, which sold stakes in 21 fields to BP Plc for $7.2 billion to gain technology, may take as long as three years to reverse a slump in production from India’s biggest natural gas deposit.

‘Stagnant Margins’

“Refining has helped them this quarter after fuel demand in Asia rose,” said Rina Sanghavi, a Kolkata-based research analyst at SPA Securities Ltd. “This may not sustain as their margins are stagnating from quarter to quarter.”

Reliance shares were reduced to ‘add’ from ‘buy’ at Kotak Institutional Equities, with a price target of 1,000 rupees.

Tata Consultancy declined 1.2 percent to 1,120.25 rupees, halting a three-day, 8.9 percent rally. Net income may climb 16 percent to 25.2 billion rupees in the quarter ended September, according to median estimate of 28 analysts surveyed by Bloomberg News. Earnings are due later today.

Infosys gained 0.1 percent to 2,746.55 rupees. Wipro Ltd., the third-biggest software services provider, shed 1.8 percent to 356.8 rupees.

Tata Motors climbed 4.5 percent to 188.1 rupees. The stock has surged 21 percent this month, headed for the best October in eight years, data compiled by Bloomberg show.

Housing Development Finance Corp., the biggest mortgage lender, climbed 1 percent to 673.45 rupees after profit rose 20 percent to 9.71 billion rupees, beating estimates.

Monetary Policy

Inflation must ease before interest rates can be reduced, Reserve Bank of India Governor Duvvuri Subbarao said on Oct. 12, signaling policy makers may maintain their tight monetary stance. The RBI raised rates for a 12th time since March 2010 on Sept. 16 and its next policy meeting is on Oct. 25.

The wholesale-price index rose 9.72 percent from a year ago after a 9.78 percent jump in August, the trade ministry said on Oct. 14. The median of 21 estimates in a Bloomberg News survey was for a 9.75 percent increase. An inflation rate of a more than 9 percent is above the central bank’s “comfort level,” Subbarao said on Oct. 13.

Overseas investors bought a net 6.66 billion rupees of Indian equities on Oct. 13, taking their total investment in stocks this year to 10.5 billion rupees, according to data from the market regulator. They withdrew a net $2.4 billion in August, the most since October 2008.

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