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India’s Sensex Has First Weekly Drop in Four as Metalmakers Fall

Indian stocks declined, with the benchmark index ending three weeks of gains. Industrial and metal companies led the retreat.

Bharat Heavy Electricals Ltd., the largest maker of power equipment, declined to a one-month low. Aluminum maker Hindalco Industries Ltd. fell the most in two months, sending a gauge of metalmakers to its biggest drop in a month. ITC Ltd., India’s biggest tobacco company, slid after its sales trailed estimates.

The S&P BSE Sensex lost 0.2 percent to 20,683.52 at the close, taking the week’s loss to 1 percent. The rally that saw the gauge briefly exceed its record closing high yesterday will falter as higher interest rates curb economic growth, according to John Praveen, chief investment strategist with Prudential International Investments Advisers LLC.

“The bias is towards tightening rather than easing,” he said in an interview with Bloomberg TV India. “At these levels you should keep some cash.”

Bharat Heavy fell to 137.35 rupees, the lowest price since Sept. 24. The S&P BSE Capital Goods Index dropped 1.6 percent, ending a five-day, 10 percent rally.

Hindalco plunged 4.7 percent to 109.2 rupees, the biggest decline since Aug. 27. Tata Steel Ltd. dropped 3.1 percent, the most since Sept. 30. The two stocks were the worst performers on the Sensex today.

ITC, which has the highest weighting on the Sensex, lost 0.8 percent. The company’s revenue in the quarter ended Sept. 30 climbed to 77.8 billion rupees, trailing the 81.1-billion rupee estimate compiled by Bloomberg. The stock had risen as much as 1.2 percent before earnings were announced.

Earnings Scorecard

GAIL India Ltd. retreated 2.4 percent to 343.6 rupees. The nation’s largest gas supplier reported a 7 percent decline in second-quarter profit to 9.16 billion rupees, which trailed the 9.27 billion rupees estimate in a Bloomberg survey.

Profits at 11 out of 12 Sensex companies that have posted earnings so far for the quarter ended September have beaten or matched estimates, compared with 47 percent that missed projections in the previous quarter.

The Sensex has risen 16 percent from this year’s low on Aug. 21 as the Federal Reserve’s decision to maintain stimulus spurred inflows by foreign funds. The gauge fell 0.2 percent to 20,725.43 yesterday, after briefly rising above the all-time closing high of 21,004.96.

Global investors have bought a net $2 billion of domestic shares so far this month, adding to inflows of as much in September, data from the regulator show. They purchased $162 million of stocks on Oct. 24, taking this year’s inflows to a net $15.5 billion, the data show.

‘Fundamentals Challenging’

India’s economy expanded 4.4 percent in the three months to June, the slowest pace in four years. Consumer prices rose 9.84 percent in September from a year earlier, compared with 9.52 percent in August. That’s the second highest in the Group of 20 major economies, according to data compiled by Bloomberg.

“The only thing that’s supporting the markets is liquidity,” Prudential’s Praveen said. While the Sensex will probably reach his year-end target of 21,300, “going much beyond that will be difficult given that the underlying fundamentals are somewhat challenging, especially with weakness in gross domestic product growth and inflation being elevated,” he said.

The Sensex has risen 6.5 percent this year and is valued at 14 times estimated 12-month profits, compared with the MSCI Emerging Markets Index’s 10.6 times. The CNX Nifty Index dropped 0.3 percent to 6,144.90.

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