- Foreign outflows reach $442 million in November on Fed concern
- Investors await Fed minutes, Bank of Japan meeting outcome
Indian stocks retreated to a two-month low, with the benchmark index dropping the most among Asian equity indexes, as concern about China’s economic slowdown deepened and investors awaited the release of the U.S. Federal Reserve minutes.
The nation’s two biggest software exporters, which have a 14 percent weighing in the S&P BSE Sensex, tumbled as a gauge of technology shares had the steepest decline in almost three months. Infosys Ltd. retreated to a four-month low after saying Tuesday that the quarter started Oct. 1 has been “very weak.” Tata Consultancy Services Ltd., India’s most valuable company, decreased to a 16-month low.
The Sensex plunged 1.5 percent to its lowest close since Sept. 8. The gauge has fallen 4.4 percent in November, set for its worst month since August, as overseas funds reduce their holdings of domestic shares amid weak company earnings and concerns about a pending increase in U.S. interest rates. Fifty-seven percent of Sensex members in the September quarter posted earnings that matched or beat estimates, versus 60 percent in June, data compiled by Bloomberg show.
“Earnings aren’t recovering, and now we got companies saying that even the current quarter won’t be great,” R. K. Gupta, New Delhi-based managing director of Taurus Asset Management Co., which has $630 million in assets, said by phone. “China’s problems seem to be deepening and that raises question about the world economy."
President Xi Jinping’s comment that China faced downside economic risks dragged the nation’s stocks lower as the MSCI Emerging Markets Index slid for a third time in four days. Commodity and technology companies were among the biggest industry-group decliners in the gauge.
Vedanta Ltd. and Hindalco Industries Ltd., the largest copper and aluminum maker, were among the biggest decliners on the Sensex. Copper tumbled toward a six-year low as data on Chinese property prices underscored the slowdown in the metal’s largest consumer.
Fed minutes from its last meeting in October will be scrutinized for clues on whether policy makers plan to raise interest rates in December. Global funds have pulled $442 million from Indian shares in November as future traders put the odds that the Fed will raise rates next month at 66 percent.
“Foreigners have been selling Indian equities, so unless that reverses there will be no support to the market,” Arun Kejriwal, a director at Mumbai-based Kejriwal Research and Investment Pvt., said by phone. “The market will trade in a broad range unless we see clarity on the Fed move.”
Overseas funds sold a net $60 million of Indian stocks on Nov. 17, paring this year’s inflows to $3.9 billion. The Sensex trades at 15.2 times projected 12-month earnings, compared with a multiple of 11.1 times for the MSCI Emerging Markets Index.