India’s Sensex Completes Second Monthly Drop on Earnings Concern

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Indian stocks dropped, with the benchmark gauge capping a second monthly loss, as concern earnings growth will slow spurred capital outflows and traders closed positions on last day of monthly derivative contracts.

Housing Development Finance Corp. was the worst performer on the S&P BSE Sensex. Tata Motors Ltd. and Mahindra & Mahindra Ltd., the largest automakers, fell 2.4 percent each, while Tata Steel Ltd. slid the most in 11 weeks. Bharti Airtel Ltd. fell for a second day after posting profit that missed estimates.

The Sensex decreased 0.8 percent to 27,011.31, taking the month’s loss to 3.4 percent. Foreigners withdrew $611 million from shares since Monday, the biggest weekly outflow in 2015. While seven out of the 11 Sensex firms that have posted results for the March quarter have beaten or matched estimates, profits will decline for a second straight quarter, forecasts compiled by Bloomberg show. Thursday’s losses came after the Federal Reserve left open the possibility of raising rates this year.

“Investors are looking for evidence of earnings growth, which looks at least two to three quarters away,” Vaibhav Sanghavi, managing director at Ambit Investment Advisors Pvt., said by phone from Mumbai. “We are in a phase where numerous global and local factors have come together at the same time.”

The CNX Nifty Index fell 0.7 percent to 8,181.5, while April-delivery futures also fell 0.7 percent. Traders extended 68 percent of their Nifty April futures contracts to May, data available at 5:05 p.m. showed. That compares with a six-month average of 74 percent at expiry. Equity derivative contracts in India lapse on the last Thursday of every month.

Nearing Correction

The Sensex has dropped 9 percent from its Jan. 29 record, nearing some traders’ definition of correction, as investors seek more evidence that the government’s efforts to bolster growth will lead to a revival in company profits. Foreigners have been net sellers of shares for all but one of the past 10 trading days, dragging down the gauge’s valuations to 15 times projected 12-month earnings, the cheapest in four months.

“One should not be in a hurry to buy just because stocks have come off 10 to 15 percent as valuations are still not favorable,” Daljeet Kohli, head of research at IndiaNivesh Securities Pvt., told Bloomberg TV India today.

HDFC tumbled 2.8 percent to its lowest close level since Jan. 14 and Bharti Airtel declined 1.6 percent, trimming this year’s gains to 8.1 percent.

Tata Steel slid 2.6 percent, the second-worst performer on the Sensex, while Dr. Reddy’s Laboratories Ltd. fell to a two-month low.

Indian markets are closed on Friday for a public holiday.

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