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Indian Stocks Drop as Infosys Slumps Most in Decade on Outlook

April 12 (Bloomberg) -- Indian stocks tumbled the most in more than a month, with the benchmark index completing a second week of declines. Software makers led the drop as Infosys Ltd. forecast annual sales will rise slower than analysts estimated.

The S&P BSE Sensex plunged 1.6 percent to 18,242.56 at the close in Mumbai, the steepest decline since Feb. 26. Volumes on the gauge were 32 percent below the 30-day average. Infosys, India’s second-largest software exporter, slumped the most in a decade. Tata Motors Ltd. dropped for the first time this week.

Infosys is “a good company but unfortunately demand for its services isn’t just picking up,” Gary Greenberg, a fund manager at Hermes Fund Managers Ltd., said in an interview to Bloomberg TV today. “Infosys is trying to make a transition to becoming a consultancy company but that’s harder than it looks. We happily don’t own Infosys.”

Infosys, kicking off the reporting season for the March quarter, said its revenue may rise 6 percent to 10 percent in the year that began April 1. Analysts estimated sales to grow 12.7 percent to 454.7 billion rupees ($8.3 billion), according to a Bloomberg survey. Net income for the 30 Sensex companies may decline 0.8 percent from a year earlier, according to estimates compiled by Bloomberg, the first drop in three years.

Infosys plunged 21 percent to 2,296.65 rupees, the most since April 2003. The stock’s rank by weighting in the Sensex slipped to sixth from second biggest yesterday. Rival Tata Consultancy Services Ltd. decreased 1.6 percent to 1,511.75 rupees. Wipro Ltd. sank 4.8 percent to 383.8 rupees. The three companies get at least half their revenue from the U.S.

‘Challenging Environment’

“The overall business environment remains challenging” for software makers, K.K. Mital, a fund manager with Globe Capital Market Ltd., said from New Delhi. “A recovery will take place only later in the year if the U.S. recovers and Europe stabilizes.”

Tata Motors lost 1.1 percent to 275.15 rupees, ending a four-day 9 percent climb. Larsen & Toubro Ltd., India’s largest engineering company, fell 1.4 percent to 1,359.75 rupees.

Infosys dragged the Sensex lower even as factory output unexpectedly climbed in February and consumer-price inflation slowed. Industrial production climbed 0.6 percent in February, government data showed today. That compares with a contraction of 1.3 percent estimated by economists. March consumer-price growth slowed to 10.4 percent, lower than the 10.70 percent estimated by economists, according to another report today.

Foreign funds sold a net $114 million of local stocks on April 9, a sixth day of outflows that’s the longest stretch since May. They have pared this year’s record purchases amid concern that corporate earnings will weaken as the economy, facing the fastest inflation among major emerging nations and a record current-account gap, grew at the weakest pace since 2003 in the year to March 31.

The Sensex has dropped 6.1 percent this year and is valued at 12.3 times projected 12-month profits, compared with 13.5 times at the beginning of 2013. The MSCI Emerging Markets Index trades at 10.3 times. The 50-stock CNX Nifty Index dropped 1.2 percent to 5,528.55. Its April futures settled at 5,535.2.

India VIX, which measures the cost of protection against losses in the Nifty, fell 3.1 percent to 16.45.

To contact the reporter on this story: Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

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