India's Sensex Declines Amid Foreign Outflows Before Growth Data

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Indian stocks declined, with the benchmark gauge capping its worst August in almost four years, before the release of growth data and as foreigners withdrew the most money from shares since October 2008 amid a global selloff. 

Bharat Heavy Electricals Ltd., a power-equipment maker, fell to a three-month low. Oil & Natural Gas Corp., the largest explorer, slid 1.8 percent, ending a two-day, 8.4 percent rally. Reliance Industries Ltd., owner of the world’s largest oil refinery, dropped for the first time in five days. Bharti Airtel Ltd., India’s biggest telecom operator, was among the worst performers on the S&P BSE Sensex.

The Sensex retreated 0.4 percent to 26,283.09 at the close in Mumbai after changing direction at least six times. The gauge tumbled 6.5 in August, the most since November 2011, as overseas funds pulled $2.52 billion from local stocks this month. That’s the biggest withdrawal since October 2008. The MSCI Asia Pacific Index slid 0.8 percent Monday amid concern the U.S. will push ahead with raising borrowing costs as soon as September, despite the prospect of further volatility in Chinese equities.

FII Flows
FII Flows

“India is part of the emerging-markets basket and if there’s a risk-off trade it cannot be insulated,” U.R. Bhat, a director at the Indian unit of Dalton Strategic Partnership LLP, a U.K.-based investment management company, told Bloomberg TV India today.

Sentiments also soured after Prime Minister Narendra Modi stepped back from a move to make it easier for companies to buy land after increased opposition from farmers ahead of a key election. Polls in the state of Bihar are crucial to controlling the upper house of parliament, where opponents have blocked the land bill and Modi’s other key economic proposals.

“Overseas investors are concerned about the progress of legislative and non-legislative actions by the government,” said Bhat. “Investment-led economic growth must happen through the government as the private sector is not in a mood to buoy investments.”

Official data due Monday will probably show that the economy expanded 7.4 percent in the June quarter, versus 7.5 percent in the preceding three months, according to the median of 27 analyst estimates in a Bloomberg survey.

The Sensex trades at 14.9 times projected 12-month earnings, compared with a multiple of 10.6 for the MSCI Emerging Markets Index. The CNX Nifty Index dropped 0.4 percent to 7,971.30. The Sensex has plunged 6.5 percent in August, the biggest retreat since November 2011.

Bharat Heavy dropped 3.5 percent, extending last week’s 5.7 percent decline. Oil & Natural Gas fell for the first time in three days, while Reliance lost 1.9 percent to 855.9 rupees. Bharti Airtel slid 2.3 percent to 354.3 rupees.

Lupin Ltd., Sun Pharmaceutical Industries Ltd., Cipla Ltd. and Dr. Reddy’s Laboratories Ltd., the nation’s largest health-care companies by value, were the best performers on the Sensex as some investors bought defensive stocks.

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