India’s benchmark stock index fell the most in two weeks, led by automobile and telecommunication companies. A gauge of volatility climbed to a five-month high.
The S&P BSE Sensex retreated 1.3 percent to 18,801.64 at the close in Mumbai, its biggest drop since March 19. Volumes were 33 percent lower than the 30-day average. Bharti Airtel Ltd., the nation’s biggest mobile-phone services company, plunged 3.8 percent to a two-week low. Tata Motors Ltd., the owner of Jaguar and Land Rover luxury brands, slid 3.7 percent, leading automakers lower.
The Sensex climbed on each of the past four days after falling for seven straight days amid concern over the weakest economic growth in a decade, a record current-account deficit and the highest inflation rate among major emerging nations. The gauge last week completed its first quarterly loss since the quarter ended December 2011.
“Investors aren’t too confident about equities given the macroeconomic scenario,” Vaibhav Sanghvi, director at Ambit Investment Advisors Pvt. in Mumbai, said by telephone. “The earnings season, the next big event for the market, isn’t likely to be very exciting and the impact of slow economic growth will show in those numbers.”
Bharti retreated 3.8 percent to 280.8 rupees, the lowest level since March 20. India’s telecom companies may underperform this financial year as the industry struggles to control costs and controversy over spectrum renewal charges intensifies, Daiwa Capital Markets said in a report. The brokerage kept its underperform rating for Bharti. Idea Cellular Ltd., which is not a Sensex member, slid 2 percent to 110.15 rupees.
Tata Motors dropped to 257.2 rupees, its lowest close since Oct. 31. Sales slumped 28 percent from last year to 72,712 units in March, the company said April 1. Motorcycle maker Bajaj Auto Ltd. dropped for a sixth day, losing 3.4 percent to 1,692.35 rupees, its lowest close since Sept. 8. March sales dropped 10 percent, the company said yesterday.
Infosys Ltd. will report earnings on April 12, marking the start of the reporting season for the March quarter. Net income at about 43 percent of the 30 Sensex firms trailed forecasts in the three months ended Dec. 31, compared with 40 percent in the previous two quarters.
“We cut our earnings per share estimates to 1,180 rupees from 1,225 rupees at the start of the year” for Sensex firms, Raamdeo Agrawal, joint managing director at Motilal Oswal Financial Services Ltd. in Mumbai, told Bloomberg TV India. “We’re expecting only 7 to 9 percent EPS growth for the year ending March 31, 2014. We’re passing through difficult times.”
The South Asian economy grew 4.5 percent from a year ago in the final three months of 2012, the weakest pace in almost four years. The statistics bureau predicts an annual expansion of 5 percent in the year through March, the lowest in a decade.
“Analysts are, as in fiscal 2013, being too optimistic about a recovery in the economy on the back of a sustained fall in interest rates,” analysts Jyotivardhan Jaipuria, head of India research at Bank of America Corp., and Anand Kumar wrote in a note yesterday. “So far, rate cuts have been slow and we think sales growth in fiscal 2014 will continue to be weak.”
The central bank on March 19 cut its benchmark interest rate for the second time this year to bolster the economy and signaled the scope for further rate cuts is “quite limited.” The rate is still the highest among the largest Asian markets.
The Sensex has slid 3.2 percent this year and is valued at 12.7 times projected 12-month profits, compared with a multiple of 13.5 times at the start of 2013. The MSCI Emerging Markets Index’s 10.4 times. The Indian gauge’s 30-day volatility was at 14.3, the highest reading since Oct. 18, the data show.
The 50-stock CNX Nifty index lost 1.3 percent to 5,672.9. Its April futures settled at 5,688.1. India VIX, which measures the cost of protection against losses in the Nifty, rallied 5.5 percent, the first gain in five days.
Reliance Industries Ltd., the operator of the world’s largest refining complex, fell 2.2 percent to 776.55 rupees, ending a two-day rally. Larsen & Toubro Ltd., the largest Indian engineering company, snapped a three-day gain, losing 3.2 percent to 1,379.60 rupees, its biggest drop since Oct. 8.
Prime Minister Manmohan Singh’s government has since September pursued reforms to revive faltering growth, including opening up aviation and retail industries to attract more overseas capital, cutting subsidies and easing rules on foreign investment in rupee bonds.
Foreigners sold a net $5.5 million worth of local shares on April 2, paring their net purchases this year to $10.38 billion, data compiled by Bloomberg show. Inflows last year totaled $24.5 billion, the most among 10 Asian markets tracked by Bloomberg.