Indian stocks dropped after posting their biggest weekly advance in almost six months last week. Shares of some automakers rose after monthly sales increased.
The BSE India Sensitive Index, or Sensex, slid 0.2 percent to 19,305.32 at the close. The gauge advanced 4.5 percent last week. HDFC Bank Ltd., the second-largest private lender, lost 2.4 percent after rallying 11 percent last month to a record. Maruti Suzuki India Ltd., the biggest carmaker, climbed for the first time in three days as sales rose 12.5 percent in November.
The Sensex climbed to a 19-month high on Nov. 30 as data showing economic expansion slowed last quarter to match a three-year low stoked speculation the government will introduce more policy measures to boost growth and investment. A finance ministry official said the same day that India had raised the limit for foreign investors to buy sovereign debt and company bonds in a bid to attract inflows and bolster the rupee.
“There will be occasional bouts of profit-taking,” Sanjay Sinha, founder of Citrus Advisors, said in an interview with Bloomberg TV India today. “The front-footed policy decisions taken by the government will be the tailwinds that will keep supporting the market.”
The 30-stock gauge’s 14-day relative strength index, a measure of how rapidly prices rose or fell during the period, was at 72 on Nov. 30. Some investors regard readings at 70 or more as a signal to sell.
The broader BSE-200 Index added 0.2 percent to 2,393.05, its highest close since April 27, 2011. The BSE Mid-Cap Index rallied 1.2 percent to 6,985.48, the highest level since July 27, 2011, with as many as 23 stocks on the gauge climbing to a 52-week high, data compiled by Bloomberg show.
The midcap index trades at 13.9 times estimated earnings, compared with a multiple of 15.8 times for the Sensex, data compiled by Bloomberg show. The MSCI Emerging Markets Index is valued at 11.6 times, the data show.
“In the next two months, the Sensex might move up about 3 to 4 percent, but we may see significantly higher gains in the mid-cap index,” Nirmal Jain, chairman of the Carlyle Group LP-backed India Infoline Ltd., told Bloomberg TV India today. “Valuations are more attractive and opportunities are bigger” in midcap stocks, he said. Carlyle Group held 10.38 percent of the Mumbai-based brokerage at the end of September.
Pantaloon Retail India Ltd., the largest supermarket operator whose shares are part of the mid-cap gauge, surged 9.5 percent to 230.7 rupees ahead of parliament’s scheduled debate tomorrow on allowing foreign investment in retailing. Shoppers Stop Ltd. jumped 2.6 percent to 441 rupees.
HDFC Bank slid 2.4 percent to 686.95 rupees, its steepest drop since June 1. Oil and Natural Gas Corp., India’s largest explorer, lost 1.1 percent to 262.15 rupees, amid concern it may face record high borrowing costs. Maruti rose 1.1 percent to 1,489.9 rupees. Mahindra & Mahindra Ltd., the largest maker of sport-utility vehicles and tractors, jumped 1.1 percent to a record 957.65 rupees after November sales rose 18 percent.
The Sensex has climbed 25 percent this year, driven by foreign flows and policy measures announced since September. Overseas funds bought $305 million more stocks than they sold on Nov. 30, taking their purchases in 2012 to a net $20.1 billion. That’s the highest among 10 Asian markets tracked by Bloomberg, excluding China, the data show.
Thirty-day volatility in the Sensex was at 11.2, compared with the year’s lowest reading of 9.06 set on Nov. 26, the data show. The S&P CNX Nifty Index on the National Stock Exchange of India Ltd. dropped 0.2 percent to 5,870.95 while its December futures traded at 5,911.6.
Prime Minister Manmohan Singh began a campaign in September to revive economic growth from the weakest levels since 2009 and avoid a credit-rating downgrade by paring fuel subsidies and opening up retailing and aviation to foreign investment. Gross domestic product expanded 5.3 percent in the three months to Sept. 30 from a year earlier, in line with the median of 42 estimates in a Bloomberg survey and down from 5.5 percent in the previous quarter, the government said Nov. 30.
Goldman Sachs Group Inc. upgraded India to overweight from market-weight, according to a Nov. 29 report. The Nifty may climb to 6,600 by December 2013, the bank said in its report.