Most India Stocks Drop Before Earnings as Gold-Loan Lenders Jump

Most Indian stocks declined before the start the earnings season tomorrow. Lenders of gold-backed credit rallied after the central bank eased rules.

Engineering company Larsen & Toubro Ltd. was the fell the most on the benchmark S&P BSE Sensex. Muthoot Finance Ltd. and Manappuram Finance Ltd., the nation’s largest gold-loan lenders, surged by the limit 20 percent. Infosys Ltd., the country’s second-largest software exporter, climbed for the first time in four days before its results tomorrow.

About three stocks fell for every one that gained on the S&P BSE 100 index, which dropped 0.2 percent. The Sensex slid less than 0.1 percent to 20,713.37 at the close. The MSCI Asia Pacific Index declined for a fifth time in six days after U.S. Federal Reserve minutes showed officials see the benefits of economic stimulus diminishing. India’s company earnings season begins tomorrow, when the government also will release November industrial production data December trade figures.

“The quarterly results could be a bit disappointing as expectations have got ahead of themselves,” Andrew Holland, chief executive officer at Ambit Investment Advisors Pvt. in Mumbai, told Bloomberg TV India today. The December quarter “is seasonally weak for the software sector, so don’t expect any strong guidance” from Infosys, he said.

Fed officials judged that the “efficacy” of their record bond-buying program was waning, according to a record of last month’s meeting released yesterday. Private-sector jobs data added to signs the U.S. economy can withstand cuts to stimulus.

Infosys Earnings

Infosys may report net income of 27 billion rupees ($435 million) for the quarter ended Dec. 31, according to the median estimate of 31 analysts in a Bloomberg survey. That compares with 23.7 billion rupees in the same period a year earlier. Its shares rose 0.7 percent to 3,450.80 rupees, its first advance this week.

Larsen & Toubro decreased 2.7 percent to its lowest level since Nov. 22. The stock had rallied 36 percent in the last quarter of 2013. Lender Axis Bank Ltd. fell 2.2 percent, its seventh day of decline. State Bank of India, the nation’s biggest lender, dropped to its lowest level since Oct. 17.

Muthoot Finance, the biggest lender in India that uses gold jewelry as collateral, rallied the most since August. Manappuram Finance gained to its highest level since Sept. 2. Both stocks lost about half their value in 2013.

The Reserve Bank of India raised the loan-to-value ratio for gold loans by 15 percentage points to 75 percent yesterday. The ratio represents the percentage value of the metal held as collateral that a firm may lend to customers. The previous ratio of 60 percent had been in place since March 2012.

Gold-Loan Companies

“Gold-loan companies will be back on the growth track,” V.P. Nandakumar, Manappuram’s chief executive officer and managing director, said in a phone interview. “A higher cap on loans that can be given against gold means that the loan book will grow at a faster pace.”

Global investors bought a net $27 million of local stocks on Jan. 8, ending three days of outflows, data from the market regulator show. They invested $20 billion last year, the most in Asia after Japan, and $24.6 billion in 2012, data compiled by Bloomberg show.

The Sensex is trading at 13 times projected 12-month earnings, compared with the five-year average of 14.4 times. The MSCI Emerging Markets Index is valued at 10.2 times.

The CNX Nifty Index decreased 0.1 percent to 6,168.35. The India VIX lost 0.9 percent.

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