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Indian Stocks Drop Third Day as Larsen Tumbles on Earnings Miss

May 22 (Bloomberg) -- India’s benchmark stock index fell for a third day as Larsen & Toubro Ltd. tumbled after posting fourth-quarter earnings that missed analysts’ estimates.

The S&P BSE Sensex dropped 0.3 percent to 20,062.24 at the close in Mumbai, its longest losing run since April 9. Larsen plunged 5.7 percent, the most since January 2010, as profit atr India’s biggest engineering company slid 6.8 percent to 17.9 billion rupees ($322 million) in the three months ended March. Reliance Industries Ltd., the owner of the world’s largest refining complex, retreated for a fourth day.

The Sensex capped a fifth straight week of gains on May 17, rising to its highest level since Jan. 5, 2011. The gauge has rebounded 10 percent since falling to a seven-month low on April 9, as foreign funds boosted equity purchases amid easing by global central banks. Foreigners were net buyers of Indian stocks for a 22nd day on May 20, the longest such run since the 35 days through Feb. 15, data from the market regulator show.

“The market had climbed too much, too fast and Larsen’s results gave people a reason to sell,” Jitendra Panda, head of broking at Capital First Ltd. in Mumbai, said by telephone. “Liquidity has been the sole driver over the past few weeks.”

Larsen sank 5.7 percent to 1,513.90 rupees, the biggest drag on the Sensex today. Profit trailed the 18.8 billion-rupee median estimate in a Bloomberg survey. Sales increased to 203 billion rupees from 185 billion rupees, according to Larsen’s statement. That trailed the 211.3 billion-rupee median estimate.

Reliance lost 1.2 percent to 818.75 rupees. Motorcycle maker Hero MotoCorp Ltd. slid 2 percent, the most in more than a month, to 1,650.35 rupees. Bharat Heavy Electricals Ltd. lost 1.1 percent to 203.75 rupees, ending a five-day rally. India’s largest power-equipment maker reports results tomorrow.

Earnings Scorecard

Profit at just three of the 18 Sensex companies that have reported March-quarter results so far has lagged behind analyst estimates, data compiled by Bloomberg show. Net income at about 43 percent of the 30 index companies missed forecasts in the three months ended Dec. 31, compared with 40 percent in the previous two quarters.

Volume on the Sensex was 11 percent below the 30-day average today. The 50-stock CNX Nifty Index on the National Stock Exchange of India Ltd. fell 0.3 percent to 6,094.50 while its May futures settled at 6,104.05.

The Sensex rose 0.5 percent intraday amid optimism foreign inflows into the local shares would continue after the Bank of Japan affirmed today a plan to double the monetary base over two years. Monetary easing by central banks from Europe to the U.S. and Japan has stoked demand for riskier assets. Foreigners have bought a net $13.7 billion of Indian equities in 2013, a record for the period, data compiled by Bloomberg show.

Flows have accelerated since the Reserve Bank of India cut interest rates on May 3 and helped the Sensex climb 3.3 percent in 2013, the most among benchmark gauges in the BRIC group. The Sensex is valued at 13.8 times projected 12-month profits, near the highest level since October. The MSCI Emerging Markets Index trades at 10.6 times.

To contact the reporter on this story: Shikhar Balwani in Mumbai at sbalwani@bloomberg.net

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

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