Indian Stocks End 2-Day Gain on Earnings Concern; Reliance Falls

India’s benchmark stock index fell for the first time this week amid concern company earnings will trail analysts’ estimates.

The S&P BSE Sensex index dropped 0.1 percent to 18,731.16 at the close, wiping an intraday gain of 0.7 percent. Reliance Industries Ltd., the second-biggest stock on the 30-stock gauge by weighting, retreated the most in six months after quarterly sales lagged behind forecasts. Tata Consultancy Services Ltd., the nation’s largest software exporter, slid to a two-month low before its earnings, pacing losses among its peers.

Net incomes for the Sensex companies in the March quarter may fall 0.8 percent from a year ago, the first drop in profits in three years, according to estimates compiled by Bloomberg. Earnings may recover later this year if this week’s retreat in oil and gold damps inflation, giving the central bank room to cut interest rates at its policy review on May 3, according to Ambit Investment Advisors Pvt.

“Fourth-quarter earnings will be on the weaker side and it will take the second half of the year for a recovery, driven by lower raw-material and interest costs,” Vaibhav Sanghavi, a director at Ambit, said by phone. “The fall in global commodities will eventually bring down our borrowing costs.”

Reliance slumped 3.9 percent to 773.7 rupees, the steepest fall since Oct. 8, the worst performer on the Sensex, as some investors bet the company’s refining profits will stagnate at current levels. Fourth-quarter earnings were announced after the market closed yesterday.

Software Earnings

Tata Consultancy slid 1.8 percent to 1,456.65 rupees ahead of its earnings, which were announced after market closed. Net income of 43.6 billion rupees beat analysts’ estimates of 36.1 billion rupees. Rival Infosys Ltd. lost 0.5 percent to 2,283.85 rupees and Wipro Ltd. declined 1.8 percent to 374.55 rupees.

Brent crude retreated 5.9 percent in the five days through yesterday, and gold’s 18 percent drop this year could help cut import costs by almost $7 billion in the 12 months ending March 2014, Barclays Plc said in a note today. The nation’s wholesale price-based inflation slowed to a 40-month low of 5.96 percent last month, official data showed April 15.

Reserve Bank of India Governor Duvvuri Subbarao said this month the current-account gap exceeds the desired level of 2.5 percent of gross domestic product. While the RBI pared funding costs in March for a second time this year, it said lingering inflation curbs the scope for further cuts. Nomura Holdings Inc. sees an 80 percent probability that the RBI will reduce its 7.5 percent repurchase rate by 25 basis points at its May 3 review, it said in a note on April 15.

Lenders Gain

State Bank increased 2.8 percent to 2,245.15 rupees, the highest close since March 18. ICICI Bank Ltd., India’s biggest private lender by assets, rose 1.7 percent to 1,097.65 rupees, the highest price since March 14.

Foreign funds bought a net $118 million of Indian shares on April 16, data compiled by Bloomberg show, extending this year’s net investment in equities to $10.2 billion. Inflows last year were $24.5 billion, the most among 10 Asian markets tracked by Bloomberg.

The CNX Nifty Index was little changed at 5,688.70. Its April futures settled at 5,700. India VIX, which measures the cost of protection against losses in the Nifty, rose 0.7 percent to 16.36.

The Sensex has dropped 3.6 percent this year and is valued at 12.6 times projected 12-month profits, compared with this year’s peak of 13.8 times in January. The MSCI Emerging Markets Index trades at 10.3 times.