Indian stocks dropped for the first time in five days as some investors judged a recent rally excessive.
ITC Ltd., the largest cigarette company, fell the most in eight weeks after reports that Uttar Pradesh state raised taxes on tobacco products. Tata Motors Ltd., the nation’s biggest truckmaker and owner of Jaguar Land Rover, dropped to a two-week low after June sales declined. Hindustan Unilever Ltd., the largest household products maker, decreased 1.7 percent.
The BSE India Sensitive Index, or Sensex, retreated 0.2 percent to 17,398.98 at the 3:30 p.m. close in Mumbai. The gauge earlier swung between gains and losses at least 10 times. Its 14-day relative strength index, a measure of how rapidly prices rose or fell during the specified period, was 68 on June 29. Some investors see readings of more than 70 as a signal to sell.
“Investors are taking a breather given the superb rally we had last month,” said Alex Mathews, head of research at Geojit BNP Paribas Financial Services Ltd. in Kochi. “They are waiting for some trigger, which could come from more reform measures by the prime minister to boost economic growth.”
Indian stocks jumped the most in Asia in June on optimism Prime Minister Manmohan Singh will accelerate the government’s reform agenda after he took over the country’s Finance Ministry on June 26. Singh, who will head the ministry until a successor for Pranab Mukherjee is named, was finance minister in the 1990s, sparking a turnaround in the economy that now faces one of its sternest tests.
Singh’s administration has seen its agenda stymied by opposition from its own coalition allies, and last year suspended a plan to allow Wal-Mart Stores Inc. and other foreign companies to open supermarkets. An anti-corruption bill and proposals to allow foreign direct investment in pensions are also stalled.
“There is hope that he will go quicker on reforms because there is so much pressure from the media, analysts and economists that we aren’t doing anything,” Nirmal Jain, chairman of IIFL Ltd., a Mumbai-based brokerage, said in a Bloomberg UTV interview on June 29.
The Sensex has gained 13 percent this year and trades at 13.7 times estimated earnings. Valuations sank to a three-year low of 12.4 times on May 23 on concern slowing economic growth will hurt corporate profits. The MSCI Emerging Markets Index trades at 10.1 times.
The S&P CNX Nifty Index on the National Stock Exchange of India Ltd. was little changed at 5,278.60, and its July futures settled at 5,290.50. The BSE 200 Index climbed 0.2 percent to 2,142.83.
India VIX, a gauge of options prices in the Nifty, lost 0.4 percent to 19.01. Combined trading volume on India’s top two bourses was 1.08 billion shares on June 29, about 20 percent more than the 12-month daily average of 902 million.
ITC slumped 3.4 percent to 250.05 rupees, its steepest drop since May 8. Tata Motors declined 1.9 percent to 237.95 rupees, paring this year’s advance to 33 percent. Hero Motocorp Ltd., the biggest two-wheeler maker, lost 1.6 percent to 2,114.35 rupees, ending a four-day 5.8 percent rally.
Jindal Steel & Power Ltd., the second-biggest steelmaker by market value, tumbled 2.9 percent to 456.9 rupees. The stock had jumped 8.9 percent on June 29. Hindustan Unilever decreased 1.7 percent to 446.6 rupees.
Overseas investors sold a net $122.1 million of Indian stocks on June 28, paring their investment this year to $8.5 billion, according to the nation’s market regulator.