Indian stocks fell after valuations on the benchmark index increased to a 20-month high. Carmakers, metal producers and property developers led the retreat.
The BSE India Sensitive Index, or Sensex, lost 0.5 percent to 19,923.78 at the close, with volumes on the gauge exceeding the 30-day average by 58 percent. The BSE Mid-Cap Index dropped 2.5 percent, the most in 11 months, while the BSE India Realty Index sank 4.2 percent, the sharpest loss among the 13 sectoral gauges. Tata Motors Ltd. declined the most since May after its Jaguar Land Rover Plc unit said profit growth stalled. Copper producer Sterlite Industries (India) Ltd. and aluminum maker Hindalco Industries Ltd. lost more than 2.5 percent each.
The Sensex advanced 3 percent this year through yesterday, pushing up valuations to 16.8 times reported earnings, the most expensive since May 2011. The International Monetary Fund pared its 2013 estimate for India to 5.9 percent from 6 percent, the Washington-based lender said in a report yesterday.
“The growth momentum has to pick up before new investors come in as the existing story is probably reasonably valued,” Anand Tandon, chief executive officer of JRG Securities Ltd., told Bloomberg TV India today.
Finance Minister Palaniappan Chidambaram is on a tour of Asia and Europe to woo investors. He pledged to deepen a policy overhaul that lured foreign funds to invest $24.5 billion into domestic shares last year, the most among the 10 Asian markets tracked by Bloomberg, excluding China. The inflows helped fuel the biggest annual increase in the Sensex since 2009.
“Last year we were one of the best-performing markets as we got a disproportionate amount of emerging-market funds, and this year the expectation is that perhaps China will hold pole position there,” JRG’s Tandon said.
China’s Shanghai Composite Index has risen 20 percent from almost a four-year low on Dec. 3, a threshold that signals a bull market to some investors. Emerging-market stock funds got their biggest-ever weekly inflows of $7.4 billion in the week through Jan. 9, Jonathan Garner, chief Asia and emerging market strategist at Morgan Stanley in Hong Kong, wrote in a Jan. 11 e-mail, citing data compiled by research firm EPFR Global.
Tata Motors, the best-performing stock on the Sensex last year, plunged 6.3 percent to 293.45 rupee. Maruti Suzuki India Ltd., the biggest carmaker, slid 2.2 percent to 1,538.8 rupees.
Larsen & Toubro Ltd., India’s largest engineering company, gained 1.5 percent to 1,585 rupees, erasing a loss of as much as 4 percent, after earnings beat estimates. Net income rose to 11.2 billion rupees in the third quarter, exceeded the 11 billion-rupee median of estimates in a Bloomberg survey.
Only two out of 12, or 17 percent, of Sensex members that have reported December-quarter earnings have missed forecasts, compared with 40 percent in the previous two quarters, data compiled by Bloomberg show.
Sterlite retreated 2.6 percent to 109.75 rupees. Hindalco lost 3.4 percent to 113.9 rupees. State Bank of India Ltd., the nation’s biggest lender, slid 0.9 percent to 2,459.15 rupees. ICICI Bank Ltd. ICICI Bank Ltd., the second-biggest, fell 1.4 percent to 1,164.5 rupees.
The BSE Mid-Cap Index dropped 2.5 percent, the most since February, with 34 of the 250 companies on the gauge declining more than 5 percent. The fifth day of losses took the index’s 14-day relative strength index to 31.6, the lowest since July 7. Some investors see readings below 30 as a signal to buy.
Housing Development & Infrastructure Ltd. sank 23 percent, the most since January 2009, extending this week’s losses to 38 percent. The sell-off was triggered by the sale of 5 million shares in the market by Managing Director Sarang Wadhawan Jan. 22. Wadhawan sold stock to make urgent payments, Finance Vice President Hari Prakash Pandey told Bloomberg TV India today.
The stock led 9 of the 11 members on the BSE India Realty Index lower. Developer Unitech Ltd. plunged 7 percent to 34.05 rupees, the third-biggest loser on the MSCI Emerging Markets Index today. The shares soared 74 percent in 2012.
“Many real estate companies are perceived to be low on the governance parameter,” Amar Ambani, head of research at brokerage IIFL Ltd, said by e-mail today. “Lack of project details and high cost of debt are some of the reasons why we don’t have coverage on many of these companies.”
The S&P CNX Nifty Index on the National Stock Exchange of India Ltd. lost 0.6 percent to 6,019.35. The India VIX index, which measures the cost of protection against losses in the Nifty, jumped 5.8 percent to 14.46, the most since Dec. 31.
Overseas funds were net buyers of local stocks for an 19th straight day on Jan. 23, purchasing a net $151.5 million, data from the regulator show. They have bought a net $3 billion of local stocks this year, a record for the period, data compiled by Bloomberg show.