Sensex Extends Worst Drop in 3 Months as Tata Consultancy Slides

  • Declines in software exporters outweigh gains in metalmakers
  • Global funds net buyers of shares in nine of past 10 sessions

India’s benchmark stock-index slid to a two-week low in volatile trading as software exporters countered gains in metal producers.

Tata Consultancy Services Ltd. fell to a one-month low, dragging a gauge of technology companies to its lowest level in three weeks. Tata Steel Ltd. jumped the most in seven months, sending an index of metal makers to a two-month high. Oil & Natural Gas Corp., the largest state explorer, and GAIL India Ltd., a supplier of natural gas, were among the top gainers on the S&P BSE Sensex.

The Sensex lost 0.2 percent at the close after changing direction five times even as the S&P BSE 100 Index ended little changed. The benchmark tumbled 2.1 percent Monday as concern over a slowing Chinese economy and tension in the Middle East spurred a selloff in Asian equities and currencies. Foreign investors bought $42 million of Indian shares on Friday, adding to last year’s inflows of $3.3 billion, which were the smallest since 2011.

“India will be affected by weak inflows to emerging markets,” U.R. Bhat, a director at the Indian unit of Dalton Strategic Partnership LLP, a U.K.-based investment management company, said in an interview with Bloomberg TV India on Tuesday. “Global volatility will provide long-term investors an opportunity to bet on Indian stocks.”

The worst-performing stocks in India last year are about to make a comeback in 2016, according to Ashburton Investments Ltd. and Birla Sunlife Asset Management Co. They favor large-cap shares over smaller peers due to attractive valuations and expectations foreign inflows will pick up. Global funds have been net buyers of local shares in nine of the past 10 trading sessions, data compiled by Bloomberg show.

Tata Steel and Steel Authority of India Ltd. surged at least 6.5 percent, while JSW Steel Ltd. and Jindal Steel & Power Ltd. gained more than 3 percent each. The rally was fueled by speculation that the nation will step up curbs on steel imports to fight a rising tide of cheap shipments, according to IDBI Capital Market Services Ltd.

Tata Steel was the second-worst performer on the Sensex in 2015, while Steel Authority slumped 41 percent, the most in four years, amid a tumble in global commodity prices.

“Some investors are finding value in these highly oversold stocks even as near-term concerns remain,” A.K. Prabhakar, head of research at IDBI Capital, said by phone.

The Sensex slid 5 percent in 2015 after rising 30 percent in 2014, as the euphoria over Prime Minister Narendra Modi’s economic agenda waned and concern grew that tighter U.S. monetary policy will curb the appeal of higher returns offered in emerging markets.

The Sensex trades at 15.3 times projected 12-month earnings. The MSCI Emerging Markets Index is valued at a multiple of 10.8.

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