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India’s Nifty Stock Futures Drop on Earnings Concerns

July 11 (Bloomberg) -- Indian stocks fell for the third time in four days amid concern below-average monsoon rains may hamper efforts to boost growth and hurt company earnings.

Cigarettes-to-hotels group ITC Ltd. dropped 2 percent and Hindustan Unilever Ltd., a unit of the world’s second-largest consumer-goods maker, slid 1.1 percent. Reliance Industries Ltd., owner of the world’s largest oil-refining complex, lost 1.9 percent as Sanford Bernstein downgraded the stock. Tata Motors Ltd., the biggest truckmaker, declined 2.1 percent.

The BSE India Sensitive Index, or Sensex, lost 0.7 percent to 17,489.14 at the 3:30 p.m. close. Rainfall is 23 percent below the long-term average this season, the weather office said yesterday. Smaller harvests may leave the 742 million people living in villages with less money to spend, dampening demand already dented by a slowdown in economic growth to a near-decade low. The deficit may persist until next week, L.S. Rathore, director general at the weather office, said today.

“While it is still early days, if deficient monsoon rains drive down rural consumption -- one of the very few growth drivers for India -- the market could see a correction,” Manishi Raychaudhuri and Gautam Mehta, analysts at BNP Paribas Securities (Asia) Ltd., wrote in a report today.

Profits at the 30 Sensex companies may drop 14 percent to 1,279 rupees per share in the year ending March 2013, the most in three years, estimates compiled by Bloomberg show. Thirty percent of the companies in the gauge missed estimates in the March quarter, compared with 47 percent in the period ended in December, the data show.

The Sensex, which reached a four-month high yesterday, has risen 13 percent this year and trades at 13.7 times estimated earnings. The MSCI Emerging Markets Index trades at 10.1 times.

Earnings Season

Housing Development Finance Corp., the biggest mortgage lender, flagged off the earnings season for the quarter ended June, reporting a profit of 10.02 billion rupees ($181 million) for the period. That compares with a median estimate of 10.1 billion rupees in a Bloomberg survey of 15 analysts. Shares fell 0.5 percent to 678.8 rupees.

Tata Consultancy Services Ltd. and Infosys Ltd., two of the nation’s biggest software exporters, are due to announce earnings tomorrow. HDFC Bank Ltd., the second-largest private lender, will report on July 13.

Prime Minister Manmohan Singh is betting on growth in farm output, which makes up about 15 percent of the gross domestic product, to cool inflation that the central bank last month deemed too high to cut interest rates. Asia’s third-biggest economy expanded 5.3 percent in the March quarter from a year ago, the weakest pace in nearly a decade, as policy gridlock deters investment and Europe’s debt crisis hampers exports.

Rain Deficit

A moderate El Nino may widen a monsoon deficit in India, Roger Stone, a program manager at the UN’s World Meteorological Organization, said in a July 6 interview in Singapore. Grains in India are at risk as the deficit will persist from August through to February, said Stone, who’s advised the UN agency since 1996 and has been tracking weather since 1972.

Still, the monsoon, which brings more than 70 percent of annual rainfall, may cover the entire nation by today, four days sooner than normal, the weather bureau said yesterday. Rainfall has improved countrywide in the past 10 days, farm minister Sharad Pawar told reporters today.

Reliance shed 1.9 percent to 725.65 rupees, its biggest loss in almost three weeks. “Limited earnings growth over the next 3 years means that share price appreciation will be more limited,” Sanford Bernstein analyst Neil Beveridge wrote in a report today, downgrading Reliance shares to market-perform from outperform.

India VIX

ITC lost 2 percent to 253.30 rupees, the most since July 2, and Hindustan Unilever dropped 1.1 percent to 441.40 rupees. Tata Motors retreated 2.1 percent to 241.45 rupees, the most in two weeks, and Maruti Suzuki India Ltd., the country’s largest carmaker, slid 1.4 percent to 1,203.40 rupees.

Bharti Airtel Ltd., the largest mobile-phone operator, fell 1.8 percent to 315.75 rupees, the lowest in more than a month. Wipro Ltd., the third-largest software exporter, slumped 2.7 percent to 374.30 rupees, the lowest level since Nov. 29, while aluminum maker Hindalco Industries Ltd. plunged 3 percent to 123.85 rupees, the biggest decliner on the Sensex today.

India VIX, which measures the cost of protection against losses in the S&P CNX Nifty Index, rose 3.1 percent to 18.39. The Nifty fell 0.7 percent to 5,306.30, while its July futures traded at 5,321.75. The BSE-200 Index lost 0.6 percent to 2,156.54. Combined trading volume on India’s top two exchanges was 877 million shares yesterday, compared with a 12-month daily average of 903.7 million.

Overseas investors bought a net $114 million of Indian stocks yesterday, taking their investment this year to $9.7 billion, according to the Securities & Exchange Board of India, the market regulator. That’s a record for the period, according to data compiled by Bloomberg.

To contact the reporter on this story: Shikhar Balwani in Mumbai at sbalwani@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

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