Indian Stocks Drop Most in Two Weeks on Concern Reforms Stalling

Updated on

Indian stocks declined, with the benchmark index erasing gains in the last half hour of trade, as concerns grew about the government’s economic reforms and sliding commodity prices weighed on energy companies and metalmakers.

Oil & Natural Gas Corp., the top explorer, and Reliance Industries Ltd., owner of the world’s largest refining complex, slid at least 1.5 percent. Hindalco Industries Ltd. dropped for the first time in three days, while Vedanta Ltd., the biggest aluminum and copper producer, decreased the most in a week. Tata Motors Ltd. dropped the most in two weeks on concern its luxury unit Jaguar Land Rover will face more pressure in China.

The S&P BSE Sensex fell 0.5 percent to 28,101.72, erasing gains of as much as 0.6 percent. A parliamentary session ends this week, with lawmakers so far unable to pass bills related to a goods-and-services-tax and the buying of land as the opposition demanded resignations of three key members of Prime Minister Narendra Modi’s party over graft allegations.

“Reforms seem to have been stuck, whether it is the GST, land or labor reforms,” Dipen Sheth, the head of institutional research at HDFC Securities Ltd., said by phone. “Structural reforms, not just falling commodity prices, are needed to lure overseas flows. It is the policies that makes the difference.”

Oil was little changed, after dropping below the lowest close since March 2009. The Bloomberg Commodity Index lost 1.4 percent last week, a fifth-straight loss and the longest slide since January. Eighteen of the 22 products tracked by the gauge are stuck in bear markets.

Oil & Natural Gas slipped 2.8 percent, the worst performer on the Sensex, and Reliance lost 1.6 percent. Hindalco declined 1.6 percent and Vedanta lost 1.2 percent.

Earnings Scorecard

Tata Motors decreased 2 percent after the profit slumped 49 percent to 27.7 billion rupees ($434 million) in the June quarter.

Fifteen of the 23 Sensex companies, or 65 percent, that have posted results for the quarter ended June 30 have matched or exceeded estimates, versus 40 percent in the March quarter.

Indian Oil Corp. surged to a one-week high. The state-owned refiner benefits as lower oil prices trim input costs and ease the subsidy burden. The stock has risen 29 percent this year.

The CNX Nifty Index on the National Stock Exchange of India Ltd. fell 0.5 percent to 8,525.60. The India VIX index climbed 3.7 percent to 15.47 at the close, its third day of gains after a 14 percent retreat in July.

“Recent history shows that volatility increases when the Nifty enters the 8,500-8,600 range, and a re-rating will depend on the pace and direction of the government’s reform effort,” Vinod Nair, head of fundamental research at Geojit BNP Paribas Financial Services Ltd., said by e-mail.

Global investors bought a net $18.8 million of domestic stocks on Friday, Aug. 7, taking this year’s inflows to $7.4 billion.

The Sensex has gained 2.2 percent this year and trades at 15.7 times projected 12-month earnings. The MSCI Emerging Markets Index is valued at a multiple of 11.2.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE