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Indian Stocks Snap Six-Day Rally on Results, U.S. Budget Concern

Indian stocks slid from a one-month high after earnings from some companies disappointed investors and as the re-election of U.S. President Barack Obama set up a budget confrontation with Republicans.

The BSE India Sensitive Index, or Sensex, lost 0.3 percent to 18,846.26 at the close. It rose 2.6 percent in the past six days. Sun Pharmaceutical Industries Ltd., the biggest drugmaker by value, fell for the first time in four days after quarterly profit missed analysts’ estimates. Infosys Ltd., the software exporter that got 64 percent of its revenue from North America in the year ended March, dropped the most in two weeks.

The MSCI All-Country World Index retreated 0.3 percent, extending yesterday’s 1.5 percent slump, amid concerns Obama now faces negotiating with Congress to avoid the so-called fiscal cliff of more than $600 billion in tax increases and spending cuts next year that threaten to slow U.S. growth, hurting the outlook for Asian exporters.

“It still remains to be seen if the divide between the White House and the Congress can be bridged,” said Shankar Char, Mumbai-based vice-president at ICICI Securities Ltd., a unit of India’s largest private lender.

Thirty-day volatility in the Sensex was at 10.68, near the year’s lowest reading of 10.04 set on Sept. 11, data compiled by Bloomberg show. The S&P CNX Nifty Index lost 0.4 percent to 5,738.75 while its November futures settled at 5,765.20. India VIX, which gauges the cost of protection against losses in the Nifty, dropped 2 percent to 14.22.

Fund Flows

Overseas funds were buyers of Indian equities for a sixth day on Nov. 7, purchasing a net $137 million of shares, data from the nation’s market regulator show.

The Sensex has increased 22 percent this year, driven by overseas fund purchases and government policy reforms announced since mid-September to revive economic growth. Foreigners have bought a net $18.6 billion of local shares this year, the most among 10 Asian markets tracked by Bloomberg, excluding China.

The gauge trades at 15 times estimated earnings, compared with a multiple of 11.4 times for the MSCI Emerging Markets Index, which has added 8.8 percent in 2012, data compiled by Bloomberg show.

Infosys lost 1.2 percent to 2,375.30 rupees, its steepest decline since Oct. 23. ICICI Bank Ltd. retreated 1.6 percent to 1,076 rupees after closing at a 16-month high yesterday. Larsen & Toubro Ltd. dropped 2 percent to 1,635.35 rupees.

Earnings Scorecard

Sun Pharmaceutical’s second-quarter group profit slumped to 3.2 billion rupees, hurt by a one-time loss, missing the 7.84-billion rupee median estimate in a Bloomberg survey of 28 analysts. The stock reversed an intraday gain of 2 percent to close 0.5 percent lower at 696.55 rupees after the earnings.

Tata Power Co., the largest non-state generator, fell for a second day, losing 2 percent to 101.75 rupees, the lowest level since Oct. 16. The company posted a surprise loss of 838 million rupees on Nov. 6.

State-run Oil & Natural Gas Corp., India’s largest energy explorer, reported second-quarter profit of 59 billion rupees, missing the 60.48-billion rupee median estimate in a Bloomberg survey of 37 analysts. The stock slid 0.6 percent to close at 265.25 rupees before the earnings were declared.

Nine, or 35 percent, of the 26 Sensex companies that have reported earnings for the quarter ended September have lagged behind analysts’ estimates. That compares with 40 percent of the index companies missing forecasts in the June quarter, data compiled by Bloomberg show.

Tata Motors Ltd. surged 5.4 percent to 283.95 rupees amid optimism over the outlook for its Jaguar and Land Rover luxury brands even after the automaker’s second-quarter profit lagged analysts’ estimates. The stock, which closed at its highest level since May 15, was the best performer on the Sensex today.

The results reflect “continued resilience in JLR earnings and cash flow” and JLR’s product cycle is likely to “pick up momentum in the second half,” Goldman Sachs Group Inc. said in a report today, pegging its stock-price estimate at 329 rupees.

The National Stock Exchange of India Ltd. and the BSE Ltd. traded 945 million shares yesterday, compared with a 12-month daily average of 912 million.

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