Indian Stocks Decline as Infosys Results Outweigh Output Data

Indian stocks declined, heading for the first weekly retreat in six, as a cut in profit margin and sales outlook by Infosys Ltd. outweighed better-than-estimated factory production data.

The BSE India Sensitive Index, or Sensex, slid 0.7 percent to 18,675.18 at the close in Mumbai. The gauge dropped 1.4 percent drop this week, ending a five-week rally. Infosys, the second-largest software exporter, slumped the most in three months. Wipro Ltd. declined 1.7 percent. HDFC Bank Ltd. rose 1 percent after its net income matched estimates.

Industrial production rebounded, increasing 2.7 percent in August from a year ago, government data showed. The median of 36 estimates in a Bloomberg survey was for a 1.1 percent gain. Infosys flagged off the second-quarter earnings season today. Twenty one of the 30 Sensex companies will report profits increased from a year ago, according to Bloomberg surveys.

“The current quarter’s numbers that are coming out are going to be fairly muted,” Vetri Subramaniam, head of equities at Religare Asset Management Co., which has $2.4 billion in assets, told Bloomberg TV India today. “We are seeing slowdown in revenue growth. While the relentless pressure that companies were facing on margins is abating, revenue growth is slowing as companies battle for market share.”

Profits at 40 percent of the 30 Sensex companies missed estimates in the June quarter, compared with 30 percent in the three months ended March and 47 percent three months earlier, according to data compiled by Bloomberg.

Fund Flows

The Sensex has still increased 21 percent this year as foreigners bought a net $17.7 billion of local stocks, the most among 10 Asian markets tracked by Bloomberg, excluding China. The gauge trades at 14.9 times estimated earnings, compared with the MSCI Emerging Markets Index’s multiple of 11.4 times.

Prime Minister Manmohan Singh’s government has implemented a wave of policy changes since mid-September, including cutting fuel subsidies and opening retailing and airlines to foreigners. The government yesterday changed the way fertilizer makers get subsidy payments, and a panel today submitted a report on ending state control on sugar prices.

“None of the reforms which have been announced recently will have any impact on this quarter’s reported earnings or on next quarter’s numbers because these are really in the nature of supplementary and enabling reforms,” Religare’s Subramaniam said. “We’re still far away from the point where we can start to look at the actual impact that these measures will have on revenue and earnings growth.”

IMF Forecast

India’s GDP will increase 4.9 percent in 2012, the least in a decade, Washington-based International Monetary Fund said Oct. 9. Quarterly growth slowed to an average of 5.4 percent in the first half of 2012, from 7.5 percent in 2011, according to the most recent government data. Inflation may have accelerated 7.7 percent in September, the fastest this year, according to a Bloomberg survey of 34 analysts. The data is due on Oct. 15.

The S&P CNX Nifty Index on the National Stock Exchange of India Ltd. lost 0.6 percent to 5,676.05. Its October futures settled at 5,688. The BSE-200 Index fell 0.4 percent while the BSE Mid-Cap Index rose 0.1 percent. The National Stock Exchange of India and the BSE traded 1.1 billion shares yesterday, 24 percent more than the 12-month daily average of 907 million.

Infosys tumbled 5.4 percent to 2,395.35 rupees, the most since July 12. Wipro declined 1.7 percent to 352.05 rupees.

Bharti Airtel Ltd., the largest cellphone operator, fell 2.6 percent to 260.35 rupees. Bharat Heavy Electricals Ltd., the biggest power-equipment maker, retreated 2.5 percent to 245.4 rupees. HDFC Bank gained 1 percent to 631.15 rupees. Drugmaker Cipla Ltd. rose 1.1 percent to 364.1 rupees.

Overseas investors were net buyers of Indian equities for a 13th straight day on Oct. 10, data from the market regulator showed yesterday. India equity funds attracted $157 million in the week through Oct. 10, the most in Asia, Citigroup analysts led by Markus Rosgen wrote in a report today, citing data from EPFR Global.

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