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India’s NiftyFutures Gain as Foreign Funds Extend Buying

July 17 (Bloomberg) -- Most Indian stocks dropped amid concern deficient seasonal rainfall will slow economic growth and hurt company earnings.

Mahindra & Mahindra Ltd., the nation’s largest producer of sport-utility vehicles and tractors, tumbled to a two-week low. Bajaj Auto Ltd. slid the most in two months. Axis Bank Ltd. declined 2.2 percent after its earnings report. The BSE India Sensitive Index added less than 0.1 percent to 17,105.30 at the close. Fourteen shares rose and 16 fell on the 30-stock gauge.

India’s monsoon rains have been 21 percent below a 50-year average since June 1, threatening to reduce harvests and stoke food costs, data from the weather office show. Prime Minister Manmohan Singh is relying on higher farm output, which makes up about 15 percent of gross domestic product, to cool inflation and boost an economy growing at the weakest pace in nine years.

“If we don’t see a pick-up in the monsoon in the next few weeks then there is fear that the agricultural growth forecast could be downgraded further, which will mean an even lower GDP growth,” Toral Munshi, head of India equity research at Credit Suisse Wealth Management, told Bloomberg UTV today.

India’s potential rate of economic growth may have fallen to 7.5 percent, Reserve Bank of India Governor Duvvuri Subbarao said today, as the nation joins emerging markets from China to Brazil in scaling back growth expectations. Expansion slowed to a near-decade low of 5.3 percent in the March quarter, hurt by the impact of Europe’s debt crisis on exports, a moderation in investment and elevated consumer prices.

‘Way Above’

India’s inflation unexpectedly eased in June while staying above 7 percent for a fifth straight month, data from the trade ministry showed yesterday, indicating price pressures may limit room to join a monetary stimulus drive stretching from China to Europe. Inflation is “way above” the threshold level, Subbarao said yesterday. The RBI will review rates on July 31.

The Sensex has advanced 11 percent this year and trades at 13.4 times estimated earnings. The MSCI Emerging Markets Index trades at 10.2 times.

One out of four, or 25 percent, of the Sensex companies that have announced results for the June quarter have missed analysts’ estimates, according to data compiled by Bloomberg. Profit for 30 percent of the companies in the index missed estimates in the March quarter, compared with 47 percent in the period ended December, the data show.

India VIX, which measures the cost of protection against losses in the S&P CNX Nifty Index, plunged 5.3 percent to 17.78, its lowest level since April. The Nifty lost 0.1 percent to 5,192.85 and its July futures settled at 5,198.65. The BSE-200 Index decreased 0.2 percent.

‘Underperform’

Mahindra & Mahindra declined 1.3 percent to 708.1 rupees, its lowest level since June 29. Bajaj Auto tumbled 2.8 percent to 1,445.05 rupees, its steepest fall since May 18. Tata Motors Ltd., the biggest truckmaker and owner of Jaguar Land Rover, retreated 1.5 percent to 225.9 rupees, its fifth day of decline.

“With the slowdown in demand and the monsoon effect, the consumer sector will underperform,” Girish Nadkarni, head of equity capital markets and institutional equities at Avendus Capital, told Bloomberg UTV today.

Axis Bank fell 2.2 percent to 1,023.8 rupees. Profit rose 22 percent in the June quarter to 11.5 billion rupees, matching the 11.4 billion rupee estimated by analysts. Still, provisions for bad loans gained to 2.59 billion rupees from 1.76 billion rupees a year earlier.

“Banks will be able to manage this quarter although there is pressure on non-performing assets as they have restructured loans,” said Nadkarni. “It’s in the next quarter that we will see a slowdown in demand and everything else playing out. The next quarter would be the key quarter to watch.”

Bharat Heavy Electricals Ltd., the biggest power-equipment maker, lost 1.7 percent to 226.4 rupees. Tata Consultancy Services Ltd., the largest software services exporter, dropped 1.8 percent to 1,185.9 rupees.

Overseas funds bought local shares for a 11th straight day yesterday, data from the market regulator showed, the longest stretch of net purchases since February. They have placed a net $9.9 billion in Indian equities this year, the highest in Asia and a record for the period.

To contact the reporter on this story: Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net

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

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