- Sensex trims weekly advance as Tata Consultancy, Wipro retreat
- Gauge’s 14-day RSI rose to 72, signaling rally may be overdone
Indian stocks declined for the first time this week as the quarterly results of the nation’s second-biggest software exporter disappointed investors.
Infosys Ltd. tumbled the most since April 2013 after paring its annual sales outlook. Tata Consultancy Services Ltd., Asia’s largest technology exporter, decreased the most in five months. Coal India Ltd., the world’s largest miner of the fuel, and power generator NTPC Ltd. both fell for a second day this week. Reliance Industries Ltd., owner of the world’s largest refining complex, rose before its earnings report due after market hours.
The S&P BSE Sensex decreased 0.4 percent at the close, paring the weekly advance to 2.6 percent. Investor are focusing on the June-quarter results season, which got underway on Thursday, for signs that the rally that pushed up the gauge’s valuation to near a five-year high this week are supported by company earnings.
“Company earnings will be looked at with a magnifying glass as the belief that there’s a recovery has been high after the last quarter,” Sadanand Shetty, a senior fund manager at Taurus Asset Management Co., which has $476 million, said by phone from Mumbai. “Management guidance is very important and if there’s a massive disappointment the stock will get punished."
The Sensex entered a bull market on Monday, rebounding 21 percent from a low reached in February, helped by forecasts for above-normal rain after back-to-back droughts and a recovery in company earnings. Operating profits for companies in the NSE Nifty 50 Index rose about 10 percent in the three months ended March, the most since September 2014, reversing declines in four of the previous five periods, data compiled by Bloomberg show.
Infosys tumbled 8.8 percent to its lowest level since Jan. 12 after the company predicted 10.8 percent to 12.3 percent growth in U.S. dollar terms in the year to March, down from a previous range of 11.8 percent to 13.8 percent. The company also reported first-quarter sales that lagged estimates.
Tata Consultancy, which kicked off the reporting season Thursday, fell 3 percent, ending a four-day advance. Net income increased to 63.2 billion rupees ($944 million) in the three months ended June, the Mumbai-based company said after trading ended. The results beat the 60.6 billion-rupee mean of estimates compiled by Bloomberg. The company does not provide a sales guidance. Wipro Ltd., the third biggest, slid 2.8 percent.
The Sensex 14-day relative strength index was at 72 on Thursday, above the 70 level that some investors see as a signal to sell.
“Ultimately everything boils down to one thing: earnings growth,” Paras Bothra, vice president of equity research at Ashika Stock Broking Ltd., said by phone from Mumbai. “If economic growth doesn’t culminate into company profits, the market will start looking bloated and expensive. Our is to be stock-specific, based on their earnings performance.”
Coal India retreated 1.8 percent, the most since July 7. NTPC decreased 1.5 percent, the most since July 5. Reliance Industries rose 0.7 percent to its highest level since April 27.
LIC Housing Finance Ltd. surged 3.7 percent to a record after the company’s first-quarter profit rose 6.7 percent to 33.6 billion rupees. Net interest margin widen to 2.61 percent compared with 2.41 percent in the same period a year earlier.
The Sensex has risen 6.6 percent this year. Overseas funds bought $48 million of local shares on July 13, taking this year’s net inflows to $3.2 billion.