India’s benchmark stock index declined for a second day as some investors judged recent gains to all-time highs as excessive.
Bharat Heavy Electricals Ltd., India’s biggest power-equipment maker, retreated for a fifth day. NTPC Ltd., India’s largest power producer, tumbled the most in five weeks. Tata Motors Ltd., the owner of Jaguar Land Rover, fell the most in two weeks.
The S&P BSE Sensex lost 0.7 percent to 22,359.50 at the close in Mumbai, almost erasing a weekly gain. The CNX Nifty index declined 0.6 percent. The Nifty climbed to records for eight straight days through April 2 as international investors extended Asia’s largest stock-market inflows amid cooling inflation, shrinking deficits and a strengthening rupee. India holds a national election starting April 7, with opinion polls indicating the main opposition Bharatiya Janata Party will win the most seats, ending the Congress Party’s decade-long rule.
“It’s a good sign that market has run up ahead of the elections and there is some healthy correction, which will give an opportunity for more investors to participate,” Vikram Kotak, chief investment officer for equities at Deutsche Asset Management (India) Pvt., which manages $3 billion in assets, said in a Bloomberg TV India interview today. “I am pretty optimistic.”
Prime Minister Manmohan Singh’s Congress party may be headed for its worst-ever electoral performance as voters punish the government for a series of graft scandals, Asia’s fastest consumer inflation and slowing growth. The BJP is favored by investors seeking change to revive an economy expanding at the slowest pace in a decade. Results will be announced on May 16.
Asia’s third-biggest economy probably grew 4.7 percent in the year ended March 31, according to a central-bank survey of forecasters published April 1, compared with a decade-low 4.5 percent expansion the previous year. The $1.8 trillion economy is expected to expand 5.5 percent in the current fiscal year that started April 1, according to the survey.
Reserve Bank of India Governor Raghuram Rajan held the benchmark borrowing rate at 8 percent on April 1 after consumer-price inflation eased to a two-year low in February and wholesale-price gains slowed to the least in nine months.
The current-account deficit will be kept below $40 billion this fiscal year, compared with a record $88 billion in the previous 12 months, and the budget gap will narrow to 4.6 percent of gross domestic product from 4.9 percent, according to Finance Minister Palaniappan Chidambaram.
“This rally is not happening only due to the hope around a political party coming to power,” Kotak said. “India’s economy has bottomed out and that’s contributing.”
Bharat Heavy Electricals tumbled 2.1 percent, extending this week’s loss to 8.3 percent, the most on the Sensex. NTPC declined 2.2 percent, the most since Feb. 28. The S&P BSE India Capital Goods index declined 1.2 percent this week after a 16 percent advance last month.
Tata Motors decreased 1.4 percent, the biggest loss since March 18. Wipro Ltd., the third-biggest software services provider, slid 1.4 percent.
The Sensex has climbed 5.6 percent this year and trades at 14.1 times projected 12-month earnings, compared with the MSCI Emerging Markets Index’s 10.4 times. The Indian gauge’s valuation was 18 times in November 2010, when the Sensex set its previous high.
“The index is at an all-time high but the valuations are not at an all-time high,” Deutsche Asset’s Kotak said. “Opportunities-wise, there is scarcity in the world and India is one of the very preferred destinations.”
Overseas investors bought a net $187.2 million of Indian shares on April 1 and April 2, extending this year’s purchases to $4.27 billion, the most among eight Asian markets tracked by Bloomberg.