Indian stocks dropped for the fourth day amid renewed concern about Europe’s debt crisis. Consumer goods companies and industrials led the decline.
The BSE India Sensitive Index, or Sensex, slid 0.5 percent to 19,659.82 at the close in Mumbai. ITC Ltd., India’s biggest cigarette maker, and Reliance Industries Ltd., the owner of the world’s largest oil-refining complex, were the biggest drag on the gauge. Tata Motors Ltd., owner of Jaguar Land Rover, dropped 1.6 percent. Bharat Heavy Electricals Ltd., the largest power-equipment maker, fell for the third day.
The MSCI Asia Pacific Index slid 1.4 percent amid renewed concern about the European crisis as rates on Spanish and Italian debt rose. The European Union took in 17.2 percent of India’s exports in the six months ended September 2011, making it India’s top trading partner, data from the government show. The Sensex rose to a two-year high of 20,103.53 on Jan. 25.
“Some investors are taking money off the table in the hope they can buy later at a better price, and the news from Europe helped them,” D.K. Aggarwal, chairman of SMC Investments & Advisors Ltd., which has about $100 million in assets, said by phone from New Delhi. “The next big trigger is the Union Budget, which will give investors a road map of how the government plans to finance the fiscal deficit.”
The Sensex has climbed 1.2 percent in 2013, extending last year’s 26 percent advance, as foreign funds bought shares amid government efforts to reduce subsidies, allow higher foreign investment in retailing and aviation, and hasten infrastructure projects to revive economic growth and improve public finances. Standard and Poor’s and Fitch Ratings reduced their outlooks on India’s rating, currently at the lowest investment-grade level, to negative in 2012 and said the large fiscal deficits and debt are constraining ratings.
ITC dropped 1.6 percent to 302.45 rupees, a second day of losses. Hindustan Unilever Ltd., India’s biggest home-products maker, declined 1.2 percent to 461.5 rupees. The BSE India Fast Moving Consumer Goods Index dropped for a second day, losing 1 percent. The 10-member gauge surged 47 percent last year.
Reliance slid 1.4 percent to 874.75 rupees. Tata Motors, the best performing stock on the Sensex last year, slid 1.6 percent to 287.2 rupees. Bharat Heavy plunged 2.6 percent to 211.4 rupees. Sterlite Industries (India) Ltd., the biggest copper and zinc producer, lost 1.9 percent to 107.7 rupees.
The BSE Capital Goods Index fell for the seventh day.
Volumes on the Sensex were 8 percent less than the 30-day average today. The S&P CNX Nifty Index on the National Stock Exchange of India slid 0.5 percent to 5,956.90. Its February futures settled at 5,974.90. India VIX, which gauges the cost protection against losses in the Nifty, added 1.9 percent.
Overseas investors have bought $4.58 billion of domestic shares this year, a record for the period. They bought $24.5 billion in 2012, the highest among 10 Asian markets tracked by Bloomberg, helping the Sensex to its biggest annual gain since 2009 last year.
China, Indonesia and Taiwan may receive more inflows than India this year, Herald van der Linde, head of equity strategy for Asia Pacific at HSBC Global Research, said in Mumbai today. Foreigners have bought a net $793 million of Indonesian stocks in 2013 and plowed a net $1.32 billion into Taiwan, according to data compiled by Bloomberg, which excludes China.
“Equity mutual funds are overweight on Indian equities and underweight on China, Taiwan and Indonesia,” Linde said. “Those countries will see larger inflow. We won’t see outflows from India but it may not benefit as much as these countries.”
Indian stocks are the “most overbought” among emerging markets in Asia, with cumulative net overseas buying at 1.7 percent of market value, Credit Suisse Group AG said in a note yesterday. Emerging Asia does not appear to be overbought by foreign investors because of the $1.8 billion of outflows in South Korea, according to the report.
The Sensex trades at 13.6 times estimated earnings for the year ending in March 2014, the highest level since February 2012. The MSCI Emerging Markets Index is valued at 11 times, data compiled by Bloomberg show.