Indian stocks dropped, led by power utilities and capital goods companies, as the benchmark index declined from a record.
NTPC Ltd., the nation’s top electricity generator, posted its steepest loss since January 2008, sending the S&P BSE India Power Index to its biggest decline in three months. Larsen & Toubro Ltd. slumped the most in two months, pacing losses in the S&P BSE India Capital Goods Index, which dropped from its highest level in 10 months.
The S&P BSE Sensex fell 0.3 percent to 21,255.26 at the close. The measure climbed to a record yesterday after the Bharatiya Janata Party won the state elections, giving it momentum to end the ruling Congress party’s decade-long rule in polls due by May and install Narendra Modi as prime minister. Modi is credited with achieving higher growth than the national average and increasing power capacity more than fivefold in his home state of Gujarat since becoming chief minister in 2001.
“Infrastructure stocks have rallied amid the euphoria of elections but growth and earnings will take time to revive,” Gajendra Nagpal, chief executive officer at Augment Financial Services Pvt., said by phone from New Delhi. “Investors are booking profit as the market has run up ahead of fundamentals.”
NTPC plunged 11 percent, the biggest loser on the Sensex, after the nation’s electricity regulator proposed changes to production incentives. “The proposed regulations are negative, but the stock has over-reacted,” said Sachin Mehta, an analyst at Centrum Broking Pvt.
Power Grid Corp., the nation’s biggest distributor, lost 2.9 percent. The S&P BSE India Power Index rose 23 percent from a four-year low on Aug. 27 through yesterday, taking its 14-day relative strength index to 75, above the 70 level that signals gains in the gauge may be poised to end.
Engineering company Larsen & Toubro slid 4.1 percent to 1,100.4 rupees, the biggest drop since Sept. 23. Turbine maker Bharat Heavy Electricals Ltd. tumbled 3.5 percent, the biggest loss since Nov. 7.
The S&P BSE India Capital Goods Index was valued at 18.1 times estimated earnings yesterday, the highest reading since January 2011 and above its five-year average of 16.6 times, data compiled by Bloomberg show. The gauge has risen 49 percent from its lowest level since April 2009 reached on Sept. 3.
The Sensex has climbed 9.4 percent this year, as growing exports boosted company earnings and stimulus from the Federal Reserve spurred foreign funds to pour $18.5 billion in domestic shares. That’s the biggest inflow in Asia after Japan, data compiled by Bloomberg show. The Sensex is valued at 13.8 times projected 12-month earnings, compared with a multiple of 10.6 for the MSCI Emerging Markets Index, the data show.
The 50-stock CNX Nifty on the National Stock Exchange of India Ltd. fell 0.5 percent after rising to 6,363.90 yesterday, an all-time closing high.