Indian stocks dropped for a second day amid concern the rally after the recent government measures to boost growth had made equities expensive.
The BSE India Sensitive Index, or Sensex, slid 0.3 percent to 18,579.50 at the close. The gauge has risen 6.6 percent this month, the most since June. The S&P CNX Nifty Index lost 0.3 percent to 5,645.05, changing directions at least 10 times amid expiry of the monthly Nifty derivatives series. The Nifty rose to a 14-month high on Sept. 21.
Reliance Industries Ltd., operator of the world’s largest refining complex, and Infosys Ltd., the second-largest software services provider, dropped at least 1.5 percent each. Larsen & Toubro Ltd. and Hindustan Unilever Ltd., the biggest household products maker, climbed at least 2 percent each.
“There’s been some consolidation, some fatigue setting in at higher levels as this series has been pretty strong,” Parag Doctor, a technical analyst at Keynote Capitals Ltd. in Mumbai, told Bloomberg TV India today.
The Sensex has risen 3.1 percent since Sept. 13, driving valuations to a six-month high, after Prime Minister Manmohan Singh ended a freeze on diesel prices and opened retailing and aviation sectors to foreigners the next day, the biggest policy push of his second term in office.
“The signaling effect that we are ready for reforms has happened but to really get the wheels of the investment cycle moving more needs to be done,” Hiren Ved, chief investment officer at Alchemy Investment Management Ltd., told Bloomberg TV India today. “It’s been a great relief that after a long time the government has moved, and moved swiftly.”
A withholding tax on overseas company debt was lowered on Sept. 21 and mutual funds were added in a plan meant to attract retail investors to stocks. The government approved on Sept. 24 a plan to recast short-term loans held by state-owned utilities to help them meet power-supply commitments and reduce debts.
The Sensex has advanced 20 percent this year and trades at 14.7 times estimated earnings. The ratio is still less than the gauge’s three-year average multiple of 16.3, according to data compiled by Bloomberg.
Offshore investors bought shares worth $3.3 billion so far this month, the highest inflow since February, amid a burst of policy announcements aimed at reviving an economy growing at near its slowest pace in three years. They bought a net $851 million of shares on Sept. 25, raising stock investments this year to $15.6 billion, according to data from the regulator.
“Big bang announcements by the government have increased the interest of foreign investors; this was something they have been waiting to hear for a long time,” Gajendra Nagpal, chief executive officer at Unicon Financial Intermediaries, said by phone from New Delhi. “The underlying tone remains bullish if you go by the amount of money that has come in. Foreign funds’ interest is not going to dilute in a hurry.”
The rupee advanced 0.9 percent to 53.0263 per dollar in Mumbai, according to data compiled by Bloomberg. It touched 53.0050 earlier, the strongest level since May 10, and has gained 4.8 percent in September.
The National Stock Exchange of India Ltd. and the BSE Ltd. traded 1.26 billion shares yesterday, 41 percent more than the 12-month daily average.
Reliance retreated 1.8 percent to 829.85 rupees. Infosys slid 1.5 percent to 2,549.35 rupees. Oil & Natural Gas Corp., the largest explorer, lost 2.3 percent to 275.2 rupees.
Larsen & Toubro added 2.3 percent to 1,598.15 rupees, ending a three-day fall. Tata Power Co., the biggest private generator, rose 1.7 percent to 104.55 rupees. Hindustan Unilever gained 2.1 percent to 537.75 rupees.