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Sensex Drops to 4-Month Low in India as Cipla Falls on Earnings

Feb. 13 (Bloomberg) -- India’s benchmark stock index slid to a four-month low after earnings from several of the country’s biggest companies missed estimates.

Drugmaker Cipla Ltd. plunged the most in almost five years and Coal India Ltd. fell the most in four weeks after reporting a drop in profits. Oil & Natural Gas Corp. posted the steepest decline in five months after the Supreme Court asked the explorer to pay royalties to the Gujarat state at market prices. Hindalco Industries Ltd. retreated to a six-month low after the aluminum maker’s net income trailed analyst forecasts.

The S&P BSE Sensex dropped 1.3 percent to 20,193.35, the lowest close since Oct. 8. About 74 percent of the 30 companies in the gauge that have so far posted earnings for the quarter that ended Dec. 31 have beaten or matched estimates, compared with 70 percent in the September quarter and 47 percent three months earlier. While a report yesterday showed consumer prices dipped below 9 percent for the first time since 2012, the core inflation gauge held at 8 percent, signaling the Reserve Bank of India may keep borrowing costs unchanged.

“The decline was led by bad results in an atmosphere of risk aversion,” Dipen Sheth, head of institutional research at HDFC Securities Ltd., said by phone today. “The inflation data may not warrant a change in interest rates now. We don’t expect an immediate loosening in rates.”

RBI Governor Raghuram Rajan, who increased the main rate to 8 percent from 7.75 percent last month, said in the policy statement then that further increases were unlikely in the near term if prices cool as he expects. India’s wholesale price index probably slowed to 5.60 percent growth in January, after rising 6.16 percent in December, a Bloomberg survey showed before a report due tomorrow.

Cipla, Coal India

The consumer-price index climbed 8.79 percent from a year earlier, the least since January 2012, and down from December’s 9.87 percent, data showed after trading ended yesterday. Higher rates have curbed demand, with another report yesterday showing factory output shrank 0.6 percent in December.

Cipla plunged 7.9 percent to 380.3 rupees, the most since May 2009, after its third-quarter profit of 2.84 billion rupees missed the median estimate of 3.4 billion rupees. The stock was the worst performer on the Sensex. At least three brokerages, including HSBC Holdings Plc, downgraded the shares.

Coal India tumbled 3.5 percent, the most since Jan. 17. The world’s biggest producer of the fuel reported after market hours yesterday that net income fell 12 percent to 38.9 billion rupees. The stock was the third-biggest loser on the Sensex.

Sun Pharma, ONGC

Oil & Natural Gas declined 3.4 percent, ending a four-day, 5.7 percent rally. Profit jumped 28 percent to 71.3 billion rupees, beating estimates, the company said after the market closed today. Pretax income was higher by 2.89 billion rupees due to a change in accounting, the explorer said.

Hindalco tumbled 3.2 percent to its lowest level since Aug. 27 after its profit fell 23 percent, missing estimates.

Sun Pharmaceutical Industries Ltd. increased 0.7 percent after its profit jumped 74 percent, beating estimates, and the drugmaker said it expects fiscal 2014 sales to rise 29 percent, compared with 25 percent estimated previously.

Global investors purchased a net $25.3 million of domestic shares yesterday, paring this year’s outflows to $304 million, data compiled by Bloomberg show. They invested $20 billion in 2013, the most in Asia after Japan, the data show.

The Sensex has dropped 4.6 percent this year and trades at 13.1 times projected 12-month profits, compared with an average multiple of 14.4 over the past five years. The MSCI Emerging Markets Index is valued at 9.2 times.

The CNX Nifty Index decreased 1.4 percent to 6,001.10. The India VIX gained 2.1 percent.

To contact the reporters on this story: Santanu Chakraborty in Mumbai at schakrabor11@bloomberg.net; Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net

To contact the editor responsible for this story: Michael Patterson at mpatterson10@bloomberg.net

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