Most Indian stocks fell, led by raw-materials producers, after an unexpected contraction in September industrial output fueled concern an economic slowdown will hurt corporate earnings.
About three stocks fell for every two that rose in the BSE India Sensitive Index, or Sensex, which was little changed at 18,670.34 at the close in Mumbai. Tata Steel Ltd. dropped to a two-month low after reporting an unexpected second-quarter loss. ITC Ltd., the biggest cigarette company, fell 1.5 percent, the biggest drag on the Sensex. United Spirits Ltd. surged 35 percent, a record, after Diageo Plc agreed to buy a controlling stake for $2.04 billion.
The Sensex had risen 0.4 percent before data showed India’s factory output shrank 0.4 percent in September from a year earlier, compared with the median 2.8 percent increase in a Bloomberg News survey of economists. Earnings at 12 of the 30 Sensex companies trailed analysts’ estimates for the three months to Sept. 30, same as for the June quarter, data compiled by Bloomberg show.
“There’s a knee-jerk reaction to the factory numbers,” Alex Mathews, head of research at Geojit BNP Paribas Financial Services Ltd., said in a phone interview from Kochi, South India. “The outlook remains cautious in the short term because the last few quarterly numbers have not been up to the mark. Companies are facing problems due to the slowdown.”
India needs to take more steps to revive its economy and must correct its weaknesses, Prime Minister Manmohan Singh said in Mumbai on Nov. 10.
The Sensex has rallied 21 percent this year, driven by overseas investors’ stock purchases and government policy reforms announced since mid-September to revive economic growth. The gauge 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.
The S&P CNX Nifty Index fell less than 0.1 percent to 5,683.70 and its November futures settled at 5,711.10. India VIX, which gauges the cost of protection against losses in the Nifty, soared 3.4 percent to 14.86. Trading volumes of shares in the Nifty were 35 percent below the 30-day average as of this time of day, according to data compiled by Bloomberg.
Stock markets will be closed the next two days for Diwali, the start of the Hindu new year, except for a special 90-minute ceremonial session tomorrow. Determined by the new moon, the session known as Muhurat trading is held every year on Diwali and is deemed the most auspicious time to start investments.
United Spirits jumped to 1,832.95 rupees, extending this year’s rally to 273 percent. London-based Diageo will acquire a 53.4 percent stake in the company, it said in a statement on Nov. 9. The cash will help the Indian company controlled by Vijay Mallya “improve its capital structure as well as margin profile,” Religare Capital Markets analysts led by Varun Lohchab wrote in a research note today. The analysts raised their September price target on the stock by 180 percent to 2,100 rupees, while maintaining a buy rating.
Tata Steel, the nation’s largest producer of the alloy, tumbled 1.7 percent to 384.1 rupees, extending a 3.3 percent slump on Nov. 9. Coal India Ltd., the world’s largest producer of the commodity, fell 0.6 percent to 344.65 rupees after its second-quarter profit fell short of analysts’ estimates amid surging labor costs.
ITC decreased 1.5 percent to 283.8 rupees. Hero MotoCorp Ltd., the nation’s biggest motorcycle maker, shed 1.9 percent to 1,872.4 rupees. Larsen & Toubro Ltd., the largest engineering company, dropped 0.9 percent to 1,606.4 rupees. Jindal Steel & Power Ltd. declined 1 percent to 379.2 rupees. A gauge of material producers was the worst performer among 10 industry groups on the MSCI India Index.
Lender HDFC Bank Ltd. rose 1.9 percent to 651.3 rupees, while larger rival State Bank of India, advanced 1.6 percent to 2,190.3 rupees. Bharti Airtel Ltd., the largest mobile-phone operator, climbed 1.5 percent to 280 rupees. About 3.8 million shares of the company changed hands at 281.25 rupees. The buyers and sellers were not immediately known.
Foreigners have bought a net $18.6 billion of Indian shares this year, the most among 10 Asian markets tracked by Bloomberg, excluding China. Overseas funds were buyers for a seventh day on Nov. 8, purchasing a net $56.5 million worth of shares, data from the market regulator show.