Indian Stocks Fall for 4th Day on Stimulus Concern, Japan RoutShikhar Balwani
India’s benchmark stock index slid for a fourth day, the longest stretch of losses in more than six weeks, as speculation the U.S. Federal Reserve may scale back stimulus sparked a selloff in global equities.
The S&P BSE Sensex tumbled 1.9 percent to 19,674.33 at the close in Mumbai as earnings at some of India’s top companies disappointed investors. State Bank of India plunged 7.9 percent after fourth-quarter profit dropped 19 percent and fell short of analysts’ estimates. Larsen & Toubro Ltd. capped its biggest two-day drop since 2009 as earnings yesterday trailed estimates.
Asian stocks slumped after Fed Chairman Ben S. Bernanke signaled bond purchases may be tapered if the U.S. labor market continues to improve. Japan’s Topix index tumbled 6.9 percent, the most since March 2011, as financial shares plunged amid rising bond yields. Foreigners have bought a net $14.5 billion of Indian shares in 2013, a record for the period, as easing by global central banks stoked demand for emerging-markets assets.
“We’re seeing money being taken off the table,” Jagdish Malkani, a member of the National Stock Exchange of India Ltd., said in an interview to Bloomberg TV India. “It’s an all-Japan story today and that’s rubbing off on our markets.”
State Bank, the nation’s largest lender, sank 7.9 percent to 2,177.60 rupees, the most since Feb. 22, 2012. Net income fell to 33 billion rupees ($591 million) in the fourth quarter from a record 40.5 billion rupees last year, as provisions for bad debt climbed. On a standalone basis, that missed the 37.2 billion-rupee median in a Bloomberg survey.
SBI’s earnings come a day after Larsen, India’s biggest engineering company, reported fourth-quarter profit that fell short of estimates. The company said yesterday “the challenges in the growth path of Indian economy are still persisting.”
Larsen tumbled 6.3 percent to 1,418.20 rupees, capping its biggest two-day loss since January 2009. India’s economy grew 5 percent in the year ended March, the slowest pace in a decade, according to an estimate from the government.
Power-equipment producer Bharat Heavy Electricals Ltd. declined 4 percent to 195.70 rupees. Fourth-quarter net income dropped 4.1 percent to 32.4 billion rupees from a year earlier. Even so, earnings beat the 27.3-billion rupee median estimate in a Bloomberg survey.
Profit at four of the 20 Sensex companies that have posted March-quarter results has trailed analyst estimates, according to data compiled by Bloomberg. Net income at about 43 percent of the 30 index companies missed forecasts in the three months ended Dec. 31, compared with 40 percent in the previous two quarters, the data show.
“Earnings disappointment over the next few days could trigger a correction,” Jitendra Panda, head of broking at Mumbai-based Capital First Ltd., said by phone yesterday. “The currency weakness is also leading to nervousness and caution.”
The rupee weakened past 56 per dollar for the first time since Sept. 6 today, its sixth day of losses. The yield on the 8.15 percent government bonds June 2022 climbed 2 basis points to 7.38 percent, according to data compiled by Bloomberg.
The Sensex has rebounded 7.9 percent since falling to a seven-month low on April 9, as foreign funds added to equity purchases amid easing by global central banks from India to Europe. The gauge is valued at 13.5 times projected 12-month profits, compared with a multiple of 10.5 times for the MSCI Emerging Markets Index. The Sensex’s valuation reached 14 times on May 17, the highest since October, as the measure climbed to more than a two-year high.
“We might see a bit of a cool-off as the market has risen on the back of expectations of continuance of the easy monetary policies adopted by global central banks,” David Pezarkar, head of equities at Daiwa Asset Management (India) Pvt. in Mumbai, said in an interview with Bloomberg TV India today.
Bernanke said the Fed could “step down” the pace of asset purchases if the labor market continues to improve. Japan’s Nikkei 225 Stock Average and the broader Topix Index both plunged more than 6 percent, the most since the aftermath of the 2011 quake, and futures trading in Osaka was suspended.
European stocks dropped the most in almost seven weeks and U.S. stock futures retreated.
Overseas funds bought a net $294 million of Indian stocks on May 22, data from the regulator show. The funds bought a net $883 million worth of equities last week, the most since the period ended Feb. 8, as flows accelerated after the Reserve Bank of India on May 3 cut rates for a third time this year.
Tata Steel Ltd., India’s biggest producer of the alloy, slid 2.1 percent to 299.55 rupees. The company reported group loss of 65.3 billion rupees ($1.17 billion) in the three months ended March, compared with a profit of 4.33 billion rupees a year ago. The mean estimate of five analysts in a Bloomberg News survey was a loss of 81.2 billion rupees. Earnings were announced after trading ended.
Volume on the Sensex was 34 percent above the 30-day average. The 50-stock CNX Nifty Index on the National Stock Exchange of India Ltd. slumped 2.1 percent to 5,967.05, its lowest close since May 3. Its May futures settled at 5,966.10.