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Indian Stocks Pare Weekly Rally as Factory Output Lags Estimates

Indian stocks dropped, paring their weekly advance, after government data showed factory production climbed less than estimated in December.

Reliance Industries Ltd., the nation’s biggest company, fell the most in two weeks. Hindalco Industries Ltd., the aluminum maker that controls U.S.-based Novelis Inc., sank 3.9 percent. Maruti Suzuki India Ltd., the largest carmaker, dropped for the first time in three days.

The BSE India Sensitive Index, or Sensex, fell 0.5 percent to 17,748.69 at the 3:30 p.m. close, paring its weekly advance to 0.8 percent. The gauge has risen for six weeks, its longest such run in 21 months, as foreign funds bought a net $4 billion of equities this year, compared with an outflow of $512 million in 2011. Factory output climbed 1.8 percent in December from a year earlier, missing the 2.6 percent median of 23 estimates compiled by Bloomberg News.

“Investors are taking money off the table as industrial production data has disappointed,” said Kaushik Dani, a fund manager at Peerless Mutual Fund, which has an equivalent of $884 million in assets. “The rally was driven by liquidity. Not much has changed fundamentally.”

The deterioration in factory production may fan concern the nation’s growth is slowing after the government this week forecast the weakest economic expansion since 2009. The central bank has signaled cuts in funding costs to shield the economy if inflation eases further, with a decline in Chinese exports in January underscoring the threat to Asian expansion from Europe’s protracted debt crisis.

The S&P CNX Nifty Index on the National Stock Exchange of India lost 0.6 percent to 5,381.60. The BSE 200 Index fell from a six-month high, losing 0.4 percent to 2,181.79.

Earnings Report

Reliance Industries, owner of the world’s largest refining complex, decreased 1.2 percent to 843.25 rupees. Hindalco sank 3.9 percent to 152.9 rupees. Maruti lost 2 percent to 1,244.6.

Eleven out of 21, or 52 percent, of Sensex companies have posted December-quarter profits that missed analyst estimates, compared with 40 percent in the September quarter.

Still, foreign funds bought a net $294.3 million of stocks yesterday, data from the market regulator show. Offshore funds have been net buyers on all but three days this year, as the rupee rebounded from a record low, the central bank eased its policy for the first time since 2009 and inflation slowed.

Emerging-market stocks have had their best start to a year since 2001 after European countries agreed to tighter controls and as policy makers from Brazil to the Philippines cut funding costs to stoke economic growth. Emerging stock funds lured $5.8 billion in the week ended Feb. 8, the most since mid-October 2010, according to a report by Citigroup Inc. today.

Europe Outlook

Tata Steel Ltd., the nation’s biggest producer which gets about two-thirds of its sales from Europe, jumped 5.1 percent to 475.05 rupees, its most in a month as prospects for higher prices and lower input costs attracted investors undeterred by a loss from writing down inventory.

“There’s a strong feeling that a recovery in Europe can happen quicker than expected,” said Jagannadham Thunuguntla, chief strategist at New Delhi-based SMC Global Securities Ltd. “With that hope, investors seem to be taking every bad news in their stride.”

Tata Steel yesterday reported a loss of 6.03 billion rupees ($121 million) for the December quarter, following a one-time charge of about 7.4 billion rupees at Tata Steel Europe Ltd. and other units due to a decline in prices. The loss contrasts with a 10-billion rupee profit a year earlier, and a median net income of 2.57 billion rupee estimated in a Bloomberg survey of 28 analysts.

The Sensex, which slumped 25 percent in 2011 amid concern high borrowing costs, a falling rupee and accelerating consumer prices, trades at 15.7 times estimated profits, compared with 19.4 times at end of 2010. The MSCI Emerging Markets Index is valued at 10.4 times, data compiled by Bloomberg show.

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