Indian Stocks Decline for Fourth Week; ITC, HDFC Lead Retreat

Indian stocks fell for the fourth week. Consumer companies and lenders led the decline.

The S&P BSE Sensex index, or Sensex, dropped less than 0.1 percent to 19,317.01 at the close, with volumes 3 percent below the 30-day average. The gauge lost 0.8 percent this week, the longest stretch since the period ended May 18. ITC Ltd., the country’s largest cigarette maker, slid 1.6 percent. Mortgage lender Housing Development Finance Corp. fell 1.9 percent after Goldman Sachs Group Inc. cut its recommendation on the stock.

Finance Minister Palaniappan Chidambaram, who presents the federal budget next week, faces pressure to curb spending after vowing to pare India’s budget deficit to 4.8 percent of gross domestic product in the year ending March 2014, from a goal of 5.3 percent this fiscal year. The economy will grow 5 percent this year, the least since the 4 percent increase in the 2002 to 2003 period, the statistics office said Feb. 7. Data last week showed factory output fell for a second month in December.

“The market is delicately poised before next week’s big event,” Jitendra Panda, head of broking at Capital First Ltd., said in a phone interview today. “It will be a deficit budget, which may raise taxes and revenue. If subsidies rise, it will pressure inflation and limit the scope for more interest-rate cuts this year. Rate-sensitive stocks such as banks are under pressure due to that concern.”

The Sensex has fallen 3.9 percent from a two-year high set on Jan. 25 as net incomes at the biggest companies disappointed investors. Earnings at 43 percent of the 30 index firms trailed estimates in the three months ended December, compared with 40 percent in the previous two quarters, Bloomberg data show.

ITC, Unilever

ITC fell 1.6 percent to 292 rupees. Hindustan Unilever Ltd., India’s biggest household products maker, tumbled 2.7 percent to 455.4 rupees.

Housing Development Finance dropped 1.9 percent to 799.85 rupees, the steepest drop since Jan. 11. Goldman Sachs cut the stock to sell from neutral and lowered the price estimate by 6.3 percent to 740 rupees citing increasing competition. HDFC Bank Ltd., the top lender by value, lost 1 percent to 659.3 rupees.

Tata Motors Ltd., the owner of Jaguar & Land Rover, slid 1.6 percent to 292.9 rupees, the lowest level since Feb. 21. Bharti Airtel Ltd., India’s biggest mobile services company, surged 4.5 percent to 309.65 rupees, the most since Jan. 15, after the New Delhi High Court reserved an order on renewal of licenses held by the company and Vodafone.

Overseas funds bought a net $212 million of Indian stocks yesterday, after the first net outflow this year on Feb. 19, taking this year’s net purchases to $8.2 billion, a record for the period, data compiled by Bloomberg show.

‘Warning Sign’

Foreign buying during the past 12 months as percentage of India’s stock market value has crossed 2 percent, a “warning sign” historically for future returns, Morgan Stanley said in a report dated Feb. 20. Credit Suisse Group AG said Feb. 4 that Indian equities were the “most overbought” by foreigners, at 1.7 percent of the market capitalization.

The Sensex has retreated 0.6 percent this year, the worst-performing benchmark gauge in Asia after Malaysia. The index rose 26 percent in 2012, its biggest annual gain since 2009, as the government took measures to revive the economy.

The CNX Nifty Index of the National Stock Exchange of India Ltd. declined less than 0.1 percent to 5,850.30. India VIX, which measures the cost of protection against declines in the Nifty, fell 0.9 percent to 16.79.

Before it's here, it's on the Bloomberg Terminal.