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Indian Stocks Drop as Earnings Disappoint; SBI, Tata Steel Slump

Nov. 9 (Bloomberg) -- Indian stocks had their biggest drop this month as earnings reports from companies including State Bank of India, the largest lender, and Tata Steel Ltd., the biggest producer of the alloy, disappointed investors.

The BSE India Sensitive Index, or Sensex, fell 0.9 percent to 18,683.68 at the close in Mumbai, the most since Oct. 30. It lost 0.4 percent this week. State Bank slumped 3.9 percent as a rise in bad loans outweighed better-than-estimated earnings. Tata Steel sank 3.3 percent after unexpectedly reporting a loss and Oil & Natural Gas Corp. tumbled to a five-month low after profit declined the most in almost four years.

Earnings for 12, or 40 percent, of the 30 companies that constitute the Sensex trailed analysts’ estimates for the quarter ended September, same as for the June quarter, data compiled by Bloomberg show.

“It has been a disappointing day as far as earnings go,” Sunil Pachisia, vice-president at brokerage Pratibhuti Viniyog Ltd. in Mumbai, said by phone. “Investors will now shift focus to industrial output and inflation data due next week.”

The Sensex’s 30-day volatility was at 10.98, near the year’s lowest reading of 10.04 set on Sept. 11, data compiled by Bloomberg show. The S&P CNX Nifty Index slid 0.9 percent to 5,686.25, while its November futures settled at 5,720.60. India VIX, which gauges the cost of protection against losses in the Nifty, added 1.1 percent to 14.37.

India’s government will release industrial-output data for the month of September on Nov. 12 while inflation data for October is due Nov. 14.

Foreign Flows

Overseas funds were buyers of local equities for a seventh straight day on Nov. 8, purchasing a net $56.5 million worth of shares, data from the market regulator show.

The Sensex has rallied 21 percent this year, driven by foreign inflows and the government’s policy reforms announced since mid-September to revive economic growth. Foreigners have bought a net $18.6 billion of Indian shares this year, the most among 10 Asian markets tracked by Bloomberg, excluding China.

Prime Minister Manmohan Singh started the biggest policy overhaul in a decade on Sept. 13, which included fuel-subsidy curbs and a push to spur foreign investment in some industries. India’s gross domestic product will increase 5.8 percent in the year through March, the Reserve Bank of India said in a statement on Oct. 30. That would be the slowest pace since 2003 and less than an earlier forecast 6.5 percent.

The Sensex trades at 14.9 times estimated earnings, compared with a multiple of 11.3 times for the MSCI Emerging Markets Index, data compiled by Bloomberg show.

Bad Loans

State Bank sank 3.9 percent to 2,155.05 rupees, snapping a three-day rally. Profit jumped 30 percent from a year earlier to 36.6 billion rupees, exceeding the 35.2-billion rupee median of 38 analysts’ estimates compiled by Bloomberg. Bad loans rose to 5.15 percent of total advances from 4.19 percent a year ago, the lender said in an exchange filing today.

“The bad-loan issue continues to be a matter of concern” for Indian banks, S. Naganath, chief investment officer at DSP BlackRock Investment Managers Pvt., said in an interview broadcast on Bloomberg TV India today. “Our weightage to private banks is a little higher than to state-run banks but as a whole we continue to remain optimistic because once India’s economic growth picks up, the bad loan issues will fade into the background.”

Soured loans at Indian banks widened to 3.25 percent as of June 30, from 2.94 percent in March, the Reserve Bank of India said in an Oct. 29 report. ICICI Bank Ltd., the second-largest lender, lost 1.6 percent to 1,059.20 rupees.

Tata, ONGC

Tata Steel slumped 3.3 percent to 390.55 rupees, its lowest close since Sept. 13. Net loss, including that of Tata Steel Europe Ltd., was 3.64 billion rupees in the second quarter, compared with a profit of 2.12 billion rupees last year, the company said in a statement today. The median estimate of 24 analysts in a Bloomberg survey was a 2.27-billion rupee profit.

ONGC sank 3.1 percent to 257.15 rupees, the lowest level since June 11. India’s largest energy explorer reported a 32 percent decline in second-quarter profit to 59 billion rupees yesterday, missing the 60.5-billion rupee median estimate in a Bloomberg survey of 37 analysts.

Jindal Steel & Power Ltd., the second-biggest steelmaker by value, erased a gain of as much as 1.4 percent and ended 0.2 percent lower at 383.2 rupees after second-quarter profit of 8.97 billion rupees fell short of analysts’ estimates.

Net income for Coal India Ltd., the world’s largest miner of the fuel, climbed 19 percent from a year ago to 30.8 billion rupees. That missed the 32.4-billion rupee median of 24 analyst estimates compiled by Bloomberg. Shares of the company, the last of the Sensex members to report results, fell 0.7 percent to 346.6 rupees. Earnings were announced after markets closed.

To contact the reporter on this story: Shikhar Balwani in Mumbai at sbalwani@bloomberg.net

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

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