India’s Sensex Drops for Eighth Day on Growth, Earnings Concern

Indian stocks fell for the eighth day, the longest losing run in about 15 months, amid economic growth and corporate earnings concern.

The BSE India Sensitive Index, or Sensex, slid 0.1 percent to 19,460.57 at the close, with volumes 11 percent below the 30-day average. Housing Development Finance Corp., India’s biggest mortgage lender, Larsen & Toubro Ltd., the nation’s top engineering company, and Maruti Suzuki India Ltd., the largest carmaker, all declined more than 1 percent each.

The Sensex has slid for eight straight days, the longest stretch since November 2011, as a government economic expansion forecast disappointed investors and earnings from some of the nation’s biggest companies trailed estimates. The government raised $2.7 billion in the last 10 days selling stakes in two state companies, deals that absorbed bulk of the $3.3 billion in net inflows into stocks this month from foreign investors.

“Much of the flows have gone into the substantial amount of fresh capital raised recently and the secondary market has not received that much money,” Saurabh Mukherjea, director of institutional equities at Ambit Capital in Mumbai, said in an interview to Bloomberg TV India. “We are also at that stage of the economy where everyone wants to see evidence of recovery taking hold. Weak macroeconomic data makes people nervous.”

Housing Development Finance decreased 1.1 percent to 800.2 rupees. Larsen & Toubro slid 1.4 percent to 1,489.85 rupees and Maruti Suzuki lost 1.8 percent to 1,558.8 rupees. ITC Ltd., the nation’s biggest cigarette company, fell 0.9 percent to 299.15 rupees. Bharti Airtel Ltd., the largest mobile-phone operator, retreated 1.7 percent to 316.2 rupees.

Earnings Scorecard

Oil & Natural Gas Corp. fell 1.7 percent to 308.4 rupees. Third-quarter profit of 55.6 billion rupees exceeded analyst estimates, India’s biggest energy explorer said after trading ended. Tata Power Co. rose 0.5 percent to 97.6 rupees. India’s biggest non-state generator reported an unexpected loss of 3.29 billion rupees, which included a one-time charge of 6 billion rupees. Analysts estimated a profit of 2.35 billion rupees.

Eight out of 23, or 35 percent, of Sensex companies that have reported December-quarter results have trailed estimates, compared with 40 percent in the previous two quarters, data compiled by Bloomberg show. Drugmaker Cipla Ltd. and Mahindra & Mahindra Ltd., the nation’s biggest tractor maker, last week reported earnings that missed analysts’ forecasts.

Data on December factory production and January wholesale prices are due tomorrow and Feb. 14 respectively. The nation’s gross domestic product may expand 5 percent in the year through March 31, below last year’s 6.2 percent and the least since 4 percent in 2002-2003, the state-owned statistics bureau said in a Feb. 7 statement. The GDP data may prompt the Reserve Bank of India to ease monetary policy, Ambit’s Mukherjea said.

Monetary Policy

“The RBI will cut rates again in March,” he said. The GDP data “strongly points to a rate cut of perhaps 50 basis points in March. Including the March cut, we will have another 100-basis point reduction this year.” Mukherjea maintained the brokerage’s year-end target for the Sensex at 23,000.

India became the first major Asian economy to ease borrowing costs in 2013, when the RBI cut its key repurchase rate by 25 basis points to 7.75 percent on Jan. 29, the first reduction since April 2012.

While lowering borrowing costs will help lift sentiment, the government must “follow up” on the policy measures it announced starting September, Sanjay Dutt, a director at New Delhi-based Quantum Securities Ltd., told Bloomberg India TV.

“We had some good announcements and executions but the government seems to be dithering on policy action; things are once getting into a loop,” he said. “Rate cuts need to be followed by adequate liquidity for businesses to start scaling up and investment climate to improve.”

Fund Flows

Prime Minister Manmohan Singh began announcing in September steps to curb subsidies, lure foreign investment and speed up infrastructure projects to revive growth. The Sensex jumped 26 percent last year as the measures prompted foreigners to purchase $24.5 billion of shares in 2012, the most among 10 Asian markets tracked by Bloomberg. Overseas funds have bought a net $7.4 billion of stocks this year, the data show.

Sensex valuations have fallen from the highest level since February 2012 in the past two weeks. The gauge trades at 13.5 times estimated earnings for the year ending on March 31, 2014, still higher than the MSCI Emerging Markets Index’s multiple of 10.3 times, data compiled by Bloomberg show.

The S&P CNX Nifty Index on the National Stock Exchange of India lost 0.1 percent to 5,897.85, the lowest close since Dec. 27. India VIX, which measures the cost of protection against losses in the Nifty, climbed 3.2 percent to 15.65.

‘Budget Momentum’

Nifty’s “5,900 level, give or take half-a-percent, will act provide good support for the market to start building up momentum before the budget,” Neeraj Deewan, a director at Quantum Securities, said in an interview to Bloomberg TV India today. “The consolidation phase is likely to end.”

Finance Minister Palaniappan Chidambaram will present the Union Budget on Feb. 28.

Tata Motors Ltd., the best performing stock on the Sensex last year, added 1.9 percent to 290.9 rupees, while Sterlite Industries (India) Ltd., India’s largest copper and zinc maker, rose 1.9 percent to 103.3 rupees. Hindustan Unilever Ltd., the nation’s biggest home-products maker, increased 1.7 percent to 460.55 rupees.

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