Indian Stocks Drop Amid Slowing Overseas Inflows; ITC, TCS Fall

Indian stocks fell for the fourth time in five days, led by consumer and software companies, amid a slowdown in purchases by foreign investors.

Cigarette maker ITC Ltd., which has the highest weighting in the benchmark index, retreated the most in a week. Tata Consultancy Services Ltd. declined 1 percent, sending a gauge of software exporters to a three-week low. ICICI Bank Ltd., the country’s second-biggest lender, lost 2.9 percent.

The S&P BSE Sensex slid 0.9 percent to 20,425.02 at the close. Overseas investors bought a net $36.7 million of local shares on average in the four days through Nov. 25, data from the market regulator show. That compares with an average inflow of $128 million a day in a 30-day buying spree that began Oct. 3, the data show. India’s economic growth probably held below 5 percent for a fourth consecutive quarter, according to a Bloomberg survey ahead of a report due Nov. 29.

“Foreign inflows are beginning to slow,” Alex Mathews, head of research at Geojit BNP Paribas Financial Services Ltd., said in an interview from Kollam in southern India. “Investors are concerned about the slowdown. The markets have become news driven and there is no new trigger to justify fresh purchases.”

ITC slid 1.7 percent to 310.75 rupees. Tata Consultancy had the biggest fall since Nov. 21, while Infosys Ltd. slid to its lowest level in three weeks.

ICICI Bank tumbled from its biggest rally since Oct. 29. State Bank of India, the nation’s biggest lender, declined 1.2 percent, extending the stock’s year-to-date loss to 25 percent.

Piramal Enterprises Ltd., controlled by billionaire Ajay Piramal, tumbled 12 percent, the most since May 2010 and the second-worst performer on the MSCI Emerging Market index.

‘Expensive Valuations’

The Sensex has rallied 19 percent from this year’s low reached in August to an all-time on Nov. 3 boosted by the second biggest inflows by overseas investors. Foreigners have bought $17.4 billion of domestic stocks this year, the most in Asia after Japan. The gauge is valued at 13.4 times projected 12-month earnings, compared with the MSCI Emerging Markets Index’s 10.5 times.

“The Sensex is trading at expensive valuations and there is political risk over the next three to six months,” Kelvin Tay, chief investment officer for southern Asia-Pacific at UBS AG’s wealth management unit in Singapore, said on Bloomberg TV. “India needs a lot more for it to grow where the economy is concerned.”

India’s gross domestic product grew 4.6 percent in July through September from a year ago, compared with 4.4 percent in the prior quarter, according to the Bloomberg survey. Goldman Sachs Group Inc., in a report this month, said investors are hopeful the main opposition Bharatiya Janata Party will win national elections due to be held by May.

The CNX Nifty Index decreased 0.9 percent to 6,059.10. The India VIX gained 2.6 percent.

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