India’s Sensex Falls to 1-Week Low as Reliance, Auto Stocks Drop

Indian stocks dropped, with the benchmark index falling to a one-week low, led by shares of automakers and metal producers.

The S&P BSE Sensex lost 0.8 percent to 19,294.12 at the close in Mumbai, with volume 21 percent less than the 30-day average. Reliance Industries Ltd., owner of the world’s largest refining complex, decreased the most in a week, the biggest drag on the index. Mahindra & Mahindra Ltd. and Bajaj Auto Ltd. declined at least 1.9 percent each. Tata Steel Ltd. retreated to a four-year low after CLSA Asia-Pacific Markets reduced its recommendation on the stock.

Profits at the 30 Sensex companies may rise 5.8 percent in the three months ended June after two quarters of “near-zero” growth, Bank of America Corp. said in a July 3 report. Still, there could be a “risk of disappointment in earnings” because of a weak rupee, the report said. Software maker Infosys Ltd. will be the first Sensex member to report on July 12. Data for consumer inflation and factory output are due the same day.

“All eyes are on the earnings season and the important data points due in the next few days,” Kaushik Dani, a fund manager at Peerless Mutual Fund, which has about $751 million in assets, said by telephone from Mumbai. “The earnings season doesn’t look very promising, overall. Investors will focus on individual results.”

Infosys gained 0.1 percent to 2,501.15 rupees. Net income may rise 1.3 percent to 23.2 billion rupees ($386 million) in the quarter ended June, according to a median of 33 estimates in a Bloomberg survey. Tata Consultancy Services Ltd. climbed 0.5 percent to 1,511.95 rupees, ending three days of losses.

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Reliance fell 2.2 percent to 856 rupees, the most since July 3. Mahindra lost 2.7 percent to 912.55 rupees, the fourth day of losses. Bajaj Auto slid 1.9 percent to 1,862.4 rupees and Tata Motors Ltd., owner of Jaguar Land Rover, retreated 1.8 percent to 284.05 rupees.

Tata Steel tumbled 2.1 percent to 256.2 rupees. CLSA cut its recommendation to sell from underperform and slashed its price target 31 percent to 215 rupees. A weak rupee will widen losses at the Corus unit and increase foreign-currency debt in local currency terms, analysts Abhijeet Naik and Nitij Mangal wrote in a report dated yesterday. Aluminum producer Hindalco Industries Ltd. lost 2.6 percent to 98.2 rupees.

The rupee added 0.8 percent to 59.6550 per dollar at the close in Mumbai, gaining for the second day, boosted by steps taken by the regulators on July 8 after the currency slid to a record 61.2125. A weaker rupee stokes inflation by raising the cost of India’s imported oil, paring the central bank’s ability to cut interest rates when it reviews policy on July 30.

The Sensex has dropped 3.8 percent since May 22 when Fed Chairman Ben Bernanke said the central bank will slow stimulus if the U.S. jobs market improves. Foreign funds pulled $1.76 billion from Indian equities in June, the highest since August 2011, data from the regulator show.

The Sensex trades at 13 times projected 12-month earnings, compared with the MSCI Emerging Markets Index’s 9.6 times. The CNX Nifty Index on the National Stock Exchange of India dropped 0.7 percent to 5,816.70.

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