India Stocks Retreat Before Fed, BOJ Meets as Reliance Tumbles

  • Reliance falls on capex worries even as results beat estimates
  • FII purchases slow in April after $4.1 billion inflow in March

Indian stocks declined for a second day, tracking losses in Asian shares as investors awaited policy decisions this week from the Federal Reserve and the Bank of Japan.

NTPC Ltd., the top power producer, tumbled the most in three weeks. Reliance Industries Ltd., owner of the world’s largest refining complex, fell to a five-week low. Maruti Suzuki India Ltd., which makes half the cars sold in India, was the worst performer on the S&P BSE Sensex before its earnings Tuesday. Tata Steel Ltd. declined for a third day.

The Sensex slid 0.6 percent at the close in Mumbai after capping a second week of gains on Friday. The gauge has rebounded 12 percent from a February low, sending its 14-day relative strength index to near the 70 threshold, which some investors see as a signal to sell. Foreigners bought $4.1 billion of local stocks last month, the most in three years. In April, they have bought just $335 million so far.

“It was liquidity which drove the rally and people are now wondering if the inflows will continue?" Ajay Srivastava, managing director at Dimensions Consulting Pvt., said in an interview with Bloomberg TV India. “The market has run little bit ahead of itself. A phase of consolidation is due."

While economists expect the Fed to keep U.S. interest rates unchanged when they meet on Wednesday, a slim majority of analysts project the Japanese central bank will boost monetary stimulus at their meeting the following day. The MSCI Asia Pacific Index dropped 0.3 percent.

Earnings Outlook

Investors are also focused on the March-quarter earnings for signs of economic growth filtering through to company bottom lines. Profits have dropped in four of the past five quarters in the worst run since the 2008 global financial crisis.

So far, four out of five Sensex companies that have reported earnings beat or matched estimates. Reliance Industries, which reported the highest quarterly profit in more than eight years on Friday, declined 2.1 percent on concerns over cost-overruns and delays in projects.

Completion of a project, which seeks to reduce energy costs at its refineries, is delayed by half a year, brokerages including Credit Suisse Securities Research & Analytics, J.P. Morgan India Pvt. and Citi Research said in separate notes to clients. IDFC Securities Ltd. cut Reliance’s shares to neutral from outperform saying higher capital expenditure is an overhang on the stock price, analyst Amit Rustagi said in a note.

Costs Mount

Reliance’s projected investments in petrochemicals expansion and refinery projects have also overshot the company’s original estimate by as much as $1.5 billion, to $18.5 billion, according to Credit Suisse. Reliance projected a expenditure of 1.5 trillion rupees ($22.5 billion) on telecom, up from 1.2 trillion rupees earlier, Citi Research said in a note.

NTPC tumbled 2.3 percent, the most since April 5. Tata Steel lost 1.8 percent in a third day of declines. Housing Development Finance Corp. decreased 1.8 percent. Maruti Suzuki retreated 2.3 percent, the most since April 7.

Cairn India Ltd., an oil producer owned by billionaire Anil Agarwal, tumbled the most since Feb. 29, after posting its biggest quarterly loss after an impairment charge. Cairn posted a group net loss of 109.5 billion rupees ($1.6 billion) in the March quarter, from a loss of 2.4 billion rupees a year earlier, the company said after trading ended Friday. That was wider than a mean loss estimate of 915.4 million rupees in a Bloomberg survey.

Mahindra & Mahindra Financial Services Ltd. rallied 8 percent, the most since May 2014, after its fourth-quarter profit beat estimates. Net income rose 12 percent to 3.7 billion rupees beating the 2.62 billion rupees estimated by analysts, the company said over the weekend.

Global funds bought $142.3 million of local stocks on April 21, taking this year’s inflows to $1.5 billion. The Sensex has dropped 1.7 percent this year and trades at 15.8 times 12-month projected earnings versus 11.8 for the MSCI Emerging Markets Index.

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