Most Indian Stocks Decline Before Infosys Earnings, IIP Data

Most Indian stocks retreated before the start of the corporate earnings season and announcement of November’s factory output data tomorrow.

The BSE India Sensitive Index, or Sensex, lost less than 0.1 percent to 19,663.55 at the close. Three shares dropped for every two that climbed on the gauge. Bharat Heavy Electricals Ltd., the nation’s biggest power-equipment maker, retreated 2.1 percent. Aluminum maker Hindalco Industries Ltd. paced losses among its peers, while Oil & Natural Gas Corp., the country’s largest state-run explorer, rallied to a 20-month high.

Infosys Ltd., India’s second-largest software exporter, may post tomorrow a 5 percent drop in profit for the quarter ended December from a year earlier, according to a Bloomberg survey. The company, which gets 98 percent of its revenue from overseas, was the worst performer on the Sensex in 2012 after clients reduced budgets amid a global economic slowdown.

“Infosys earnings are key and if the company raises its guidance the market will rally,” A.K. Prabhakar, senior vice president for equity research at Anand Rathi Financial Service Ltd. in Mumbai, said in a phone interview. “The markets would tend to trade in a range as we head toward the results season.”

Net incomes of the 30 Sensex companies may grow 11 percent from a year ago in the December quarter, after rising 7 percent in the previous three months, Kotak Institutional Equities said in a Jan. 3 report. Profit for 40 percent of the Sensex firms missed analysts’ estimates for the September quarter, the same as for the three months ended June, according to Bloomberg data.

Fuel Subsidies

Bharat Heavy lost 2.1 percent to 231.9 rupees. Hindalco retreated 1.5 percent to 130.05 rupees. Sterlite Industries (India) Ltd., the biggest copper and zinc producer, fell 1.2 percent to 115.55 rupees.

Oil & Natural Gas jumped 3.4 percent to 302.25 rupees, its seventh day of gains, on expectations the government may raise prices of diesel and cooking gas, paring the explorer’s subsidy obligations. India’s oil ministry has proposed an increase of as much as 4.50 rupees a liter on diesel and 100 rupees for a cooking-gas cylinder, Press Trust of India reported yesterday.

The government orders ONGC to sell crude oil to refiners at a discount to partly compensate them for fuel sales below cost. Fuel prices must be increased in a phased manner, Prime Minister Manmohan Singh said in a speech on Jan. 7.

Tata Motors Ltd., the owner of Jaguar and Land Rover and the best performer on the Sensex last year, rose 1.9 percent to a record 333.7 rupees. Credit Suisse Group AG in a Jan. 8 report increased the stock’s target price to 390 rupees.

Fund Flows

The Sensex jumped 26 percent in 2012, its biggest annual gain since 2009, as Prime Minister Manmohan Singh opened the economy to more foreign investments in the past four months to boost an economy growing at the slowest pace in three years and to avert a credit-rating downgrade. The steps prompted offshore funds to invest a net $24.5 billion into domestic shares last year, the highest among 10 Asian markets tracked by Bloomberg.

Foreigners have bought a net $1.4 billion of shares this year, more than three times the level at the same time in 2012, the data show. The Sensex closed near a two-year high on Jan 8.

“The rally has more to do with liquidity than fundamentals,” K.R. Bharat, managing director of Mumbai-based Advent Advisory Services, said in an interview with Bloomberg TV India. “The only trigger that will keep the Indian market momentum sustained is implementation of economic reforms.”

The Sensex trades at 15.6 times estimated earnings, the highest reading since March. The MSCI Emerging Markets Index is valued at 11 times, according to data compiled by Bloomberg.

Rate Cut

The government also releases industrial production data for November tomorrow. Factory output may have expanded 0.2 percent in November, according to the median estimate of 30 analysts surveyed by Bloomberg. Production grew 8.2 percent in October, the fastest pace in more than a year.

The Reserve Bank of India signaled last month that it may cut interest rates at the Jan. 29 review after inflation cooled to a 10-month low in November, while holding above 7 percent.

“They have some room to cut rates,” Ashima Goyal, a member of the RBI’s technical advisory committee, which makes recommendations to Governor Duvvuri Subbarao, said in an interview yesterday. “They won’t be very aggressive.”

The S&P CNX Nifty Index on the National Stock Exchange of India fell less than 0.1 percent to 5,968.65. The BSE Mid-Cap Index lost 0.5 percent. India VIX, which gauges the cost of protection against losses in the Nifty, declined 0.4 percent.

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