Aug. 9 (Bloomberg) -- Indian stocks dropped as company earnings missed estimates and the nation’s factory output fell in June for the third time in four months, adding to signs of faltering growth in Asia’s third-largest economy.
Bharti Airtel Ltd., India’s largest mobile operator, sank to near a six-year low as brokerages including Goldman Sachs Group Inc. downgraded the stock after lower-than-estimated earnings yesterday. Tata Motors Ltd., the owner of luxury car brands Jaguar and Land Rover, fell for the first day in four as net income missed analysts’ estimates. State Bank of India plunged 4.5 percent ahead of results tomorrow.
The BSE India Sensitive Index, or Sensex, slid 0.2 percent to 17,560.87 at close in Mumbai, its biggest decline since July 26. Industrial output contracted 1.8 percent from a year ago after a revised 2.5 percent rise in May, the government said today. The median of 27 estimates in a Bloomberg News survey was for a 0.4 percent increase.
“Investors are punishing companies that are disappointing on the earnings front,” Sadanand Shetty, a senior fund manager at Taurus Asset Management Co., which had about $677 million in assets at the end of June, said by phone. “The factory output numbers are a reflection of the times that we are living in.”
Today’s data adds to signs India’s economic outlook is deteriorating. Gross domestic product grew 5.3 percent in the March quarter, the weakest pace in almost a decade, as policy gridlock deterred investment, Europe’s debt crisis crimped exports and elevated domestic inflation limited the room for interest-rate cuts. The Reserve Bank of India last reduced interest rates in April after raising them a record 13 times from March 2010 to October last year to rein in inflation.
Still, the Sensex has gained 14 percent this year, helped by record overseas investor purchases. Foreign funds bought a net $155.3 million of stocks on Aug. 7, taking their investment into local stocks this year to $10.97 billion, data from the regulator show. That’s a record for the period and the highest inflows this year among 10 Asian markets tracked by Bloomberg.
The Sensex trades at 13.6 times profit. While that’s below the 15.6 multiple the gauge traded at six months ago, it’s still 27 percent more than the MSCI Emerging Markets Index’s valuation of 10.7 times, data compiled by Bloomberg show.
Bharti plunged 6.4 percent to 256.75 rupees, the lowest close since Oct. 26, 2006. Goldman Sachs and Standard Chartered Plc cut their ratings on expectation the company will have to boost promotion costs as it seeks to grow market share in India and Africa. Bharti, controlled by billionaire Chairman Sunil Mittal, said yesterday that telecommunications revenue in India were depressed because of “hyper-competition” and higher network costs. Shares sank 6.6 percent yesterday after results.
Tata Motors lost 0.9 percent to 239.3 rupees, the most in a week. Net income rose 12.3 percent to 22.45 billion rupees ($407 million) in the June quarter, it said in a statement today. The median estimate of 35 analysts compiled by Bloomberg was 27.3 billion rupees. Jaguar Land Rover posted profit to 236 million pounds ($369 million), or 22 percent below the median estimate.
Ten out of 24, or 42 percent, of companies on the Sensex that have reported June-quarter earnings so far have trailed analyst estimates, according to data compiled by Bloomberg. Profit for 30 percent of index companies missed forecasts in the March quarter, compared with 47 percent in the period ended December, the data show.
State Bank tumbled 4.5 percent to 1,968.75 rupees, the most since Feb. 22. India’s largest lender is set to report quarterly results tomorrow. Housing Development Finance Corp., the largest mortgage lender, slumped 3.7 percent to 694.9 rupees.
Indian Oil Corp. posted the nation’s biggest quarterly loss of 224.5 billion rupees after the government failed to compensate it for capping fuel prices and processing margins turned negative.
Mahindra rallied 2.8 percent to 743.05 rupees, the highest level since Feb. 21. The stock surged 3.7 percent yesterday as first-quarter profit rose 20 percent to 7.26 billion rupees, more than a median estimate of 6.12 billion rupees in a Bloomberg survey of 38 analysts.
Consumer-goods maker Hindustan Unilever Ltd. rose for a fourth day, gaining 2.3 percent to a record 488.25 rupees. Copper producer Sterlite Industries (India) Ltd. jumped 3.3 percent to 109.20 rupees and Coal India Ltd., the world’s largest producer of the fuel, rose 2.1 percent to 352.60 rupees.
India VIX, which measures the cost of protection against losses in the S&P CNX Nifty Index, slid 0.2 percent to 16.33. The Nifty fell 0.3 percent to 5,322.95 while its August futures traded at 5,358. The BSE-200 Index lost 0.3 percent to 2,149.05. India’s top two bourses traded 909 million shares yesterday, compared with a 12-month daily average of 894 million shares.
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