India’s benchmark index fell after briefly surpassing its record closing high as traders pared positions before derivatives contracts expire.
Wipro Ltd. led a gauge of technology shares to its lowest level in two weeks. Coal India Ltd., the world’s top producer of the fuel, declined to a six-week low. Bank of Baroda rose to a three-month high after the government said the bank is among 20 state-run lenders that will receive 140 billion rupees ($2.3 billion) to guard against bad debts.
The Sensex dropped 0.2 percent to 20,725.43 at the close. The gauge climbed to 21,039.42 intraday, exceeding the all-time closing high of 21,004.96 on Nov. 5, 2010. Overseas investors bought a net $15.2 billion of local shares this year, the most among the 10 Asian markets tracked by Bloomberg after Japan. The Sensex has increased 6.7 percent since Jan. 1 and is the second-most expensive benchmark stock measure among the four-largest emerging markets, data compiled by Bloomberg show.
“Valuations are looking a bit stretched now,” Vaibhav Sanghavi, a director with Ambit Investment Advisors in Mumbai, said by phone. “Markets will stay volatile ahead of the monthly derivatives expiry and the monetary policy review.”
The rally has surprised India’s equity strategists, who abandoned predictions for a record high in the Sensex on concerns earnings growth will slow. The average estimate in a Bloomberg survey of 11 forecasters fell to 19,409 this month from 21,150 in July.
The Sensex has climbed 16 percent from this year’s low on Aug. 21 as the Fed’s unexpected decision last month to maintain stimulus spurred flows to emerging markets. Overseas investors bought a net $105 million of local shares on Oct. 23, the 14th day of purchases, data from the market regulator show.
The rupee’s 12 percent rally from a record low in August also gave Reserve Bank of India Governor Raghuram Rajan scope to roll back emergency increases in borrowing costs aimed at supporting the currency. While growth in Asia’s third-largest economy slowed to 4.4 percent in the June quarter, the weakest pace since 2009, Rajan said this month that the expansion is poised to accelerate. The RBI will review rates on Oct. 29.
Net incomes at all nine of the 30 companies in the Sensex that have announced results so far this season have beaten or matched estimates, data compiled by Bloomberg show. About 47 percent of the companies trailed forecasts in the June quarter
“Earnings in the next quarter will be much better as we will see the impact of the measures taken by the government and the RBI,” Chokkalingam G., chief investment officer at Centrum Wealth Management Ltd., said by phone from Mumbai.
Wipro tumbled 4.4 percent to 470.85 rupees, boosting the two-day decline to 8.5 percent, the most since April 22. Coal India lost 3.6 percent to 279.3 rupees, the lowest level since Sept. 6. Bank of Baroda rose 1.2 percent to 597.40 rupees while HDFC Bank Ltd. added 1.4 percent to 669.3 rupees.
The 50-stock CNX Nifty Index fell 0.2 percent to 6,164.35. Rollovers in Nifty futures for October delivery were at 29 percent today, compared with 23 percent average of the previous two series, according to data compiled by Bloomberg.
Derivative contracts in India expire on the last Thursday of the month.