India’s Sensex Drops for Second Day as Metal Producers Decline

S&P BSE Sensex retreats to one-week low before expiry of monthly derivative contracts on July 31.

  • CNX Nifty -0.5%; BSE 100, BSE 500 Indexes -0.5%
  • Tata Steel -1.6% to lowest in two weeks; Hindalco, India’s No. 2 aluminum maker, -2.1%; Coal India -3.4%, biggest loss in 3 weeks and most on Sensex; copper maker Sesa Sterlite -0.7%; S&P BSE Metals Index -1.5% in 2nd day of losses
  • Coal India -3.4%, most in 3 weeks and biggest loser on Sensex
  • NOTE: Sensex trades at 15.5 times projected 12-month profits, versus MSCI Emerging Markets Index’s multiple of 11.2; foreign investors bought $61.1m of local shrs on July 24, taking this year’s inflows to $12.1b, most in Asia; Indian gauge +23% YTD
    • “Equity markets in India have had a strong run in India so much so that Sensex P/E ratio is higher than that for the S&P 500,” Jan Dehn, London-based head of research at Ashmore Group Plc, which has ~$70b in emerging-market assets, told Bloomberg TV India; “Lot of money came in late after the elections and some of that money is fairly impatient and short term”
  • Wockhardt -7.8%, worst performer on S&P BSE Mid-Cap Index; stk surged 28% last week
  • Hindustan Unilever +3.5% after 1Q profit, sales exceed est.
  • Larsen & Toubro -1%; 1Q sales at India’s largest engineering co. 103.4b rupees lags behind est. 112.4b rupees; profit rises 35%, beating est.; co. reports after market hours
  • NOTE: 1Q earnings at 7 of 10 Sensex cos. that have reported results so far have topped or matched analyst estimates.
  • Open interest in CNX Nifty Index futures falls below past 6-mo. avg amid drop in implied volatility; total OI ~16m vs avg ~19m two days before expiry; put-call ratio climbs to 0.9 from 0.65 on July 14, which was lowest since Feb. last year: Bloomberg data
    • Drop in implied volatility, rising put-call ratio signals selling in put options before expiry of monthly series on July 30, Religare Securities assistant vice president Manoj Vayalar says by phone from Mumbai; “trading has been lackluster after the budget in the absence of fresh triggers”
  • BSE 100 gainers: Reliance Power +3.6%, ends 3-day retreat, Glenmark +3.8%, Jaiprakash Associates +3.1%, Bharat Forge +2.5%
  • BSE 100 losers: DLF -5.1%, taking 4-day loss to 10.4%;
Ambuja Cements -2.8%, Bharat Petroleum Corp -2.8%
  • Index movers: Consumer Durables +0.6%, Fast-Moving Consumers Goods +0.4%, IT +0.4%; Metal -1.5%, Oil & Gas -1.3%
  • Volume above 3-mo. full-day avg: GNP 3.5x 3-mo. avg; GCPL 2.5x, HCLT 1.8x, SHTF 1.7x, CAIR 1.6x, EXID 1.6x, ACEM 1.5x, TTMT 1.5x, DABUR 1.4x
  • BSE 500 movers: JKLC +11.3%, SYML +6.7%, IHFL +7.3%, CBOI +7.4%, BYRCS +6.2%; WPL -7.8%, TRTL -7.6%, IRB -5.6%, VST -1.5%, HTML -5.6%
  • Foreigners bought net $61.1m of Indian equities July 24; YTD total net $12.1b purchases
  • MXAP Index +0.2%
  • NOTE: Sensex YTD +23%
  • NOTE: Mkts closed tomorrow for public holiday