Indian Stocks Retreat for Second Day on Economic Growth Concern

Indian stocks fell for a second day on concern slowing economic growth will hurt corporate profits.

State Bank of India, the nation’s biggest lender, led a drop among its peers. Tata Motors Ltd., biggest truckmaker and owner of Jaguar Land Rover, dropped 1.3 percent.

The BSE India Sensitive Index, or Sensex, fell 0.2 percent to 15,814.72 at the 3:30 p.m. close. The S&P CNX Nifty Index on the National Stock Exchange of India Ltd. dropped 0.1 percent to 4,742.80, after falling 0.2 percent in a special trading on Jan. 7. The BSE 200 Index gained less than 0.1 percent.

Europe’s debt crisis and the Reserve Bank of India’s 13 interest-rate increases since March 2010 have slowed Asia’s third-largest economy. Growth will be about 7 percent this year ending March 31, Prime Minister Manmohan Singh said yesterday, less than a December prediction of 7.5 percent. The country faces a “difficult” three months before the fiscal year ends, Finance Minister Pranab Mukherjee said on Jan. 7.

“2012 is going to be another tough year for equities and for economies generally,” Hugh Young, who helps manage $70 billion in Asian equities at Aberdeen Asset Management Asia Ltd., told Bloomberg UTV today. “It’s very hard to portray an optimistic picture for economic or earnings growth in 2012. After a sharp fall there’s still an opportunity for markets to recover and valuations as of today do look a lot more reasonable than they did 12 months ago.”

The Sensex sank 25 percent in 2011 amid concern a falling rupee and the RBI’s record series of rate increases will worsen the effects of Europe’s crisis on earnings. The gauge trades at 13.8 times future profit, down from 19.4 times at end of 2010. The MSCI Emerging Markets Index is valued at 9.5 times.

Earnings Outlook

Infosys Ltd., the nation’s second-biggest software maker, will report profit on Jan. 12, the first Sensex company to announce earnings for the three months ended Dec. 31. Profit estimates for companies in the index for the year ending in March 2012 have fallen 8.7 percent to 1,150 rupees per share, the most since the year ended March 2009, according to about 1,500 estimates compiled by Bloomberg.

“Despite an adverse international environment, the Indian economy is expected to grow by about 7 percent this financial year,” Prime Minister Singh said in a speech in Rajasthan. “However, we hope to bring back the rhythm of our growth processes to sustain an annual growth rate of 9 percent to 10 percent in the medium term.”

State Bank slid 1.9 percent to 1,637.25 rupees, extending its five-day loss to 4 percent. Housing Development Finance Corp. slid 0.8 percent to 663.25 rupees.

Insider-Trading Order

Reliance Industries Ltd., owner of the world’s largest refining complex, decreased 1.2 percent to 706.25 rupees. Tata Motors retreated 1.3 percent to 200.6 rupees. Bharti Airtel Ltd., the largest mobile-phone operator, sank 3.2 percent to 320.45 rupees.

Jaiprakash Associates Ltd., a builder of dams, roads and bridges jumped 2.7 percent to 53.25 rupees, recovering from an intra-day level of as low as March 2009. Chairman Manoj Gaur, and his wife and brother were fined 1 million rupees ($19,000) each for breaking insider-trading rules, the market regulator said in Jan. 6 order. The company is in the process of challenging the order, it said on its website.

Foreign investors bought a net 251 million rupees ($4.8 million) of Indian stocks on Jan. 6 and Jan. 7, raising total investments in equities this year to 10.3 billion rupees, data from the Securities & Exchange Board of India show.

They sold $512 million from equities in 2011 on concern a slowdown in the U.S. and Europe’s debt crisis may erode company profits. That compares with a record inflow of $29.4 billion in 2010, which fueled a 17 percent rally in the Sensex that year.