Indian Stocks Drop for Second Day as Reliance Tumbles on Gas

Indian stocks retreated, with the benchmark index being the sole decliner among its Asian peers, as energy companies slumped after the government deferred an increase in natural gas tariffs.

Oil & Natural Gas Corp., India’s largest explorer, and Reliance Industries Ltd., owner of the world’s biggest refining complex, each plunged the most in about 10 months after the Cabinet delayed a move to raise gas prices by three months. State-run refiners Indian Oil Corp. and Hindustan Petroleum Corp. were among the worst performers on the BSE 100 Index.

The S&P BSE Sensex retreated 1 percent to 25,062.67 at the close. The gauge has climbed 12 percent this quarter, set for the best run since the period ended March 2012, on expectations a new government under Prime Minister Narendra Modi will restrict Asia’s fastest consumer inflation and boost an economy growing at near the slowest pace in a decade.

“We are now getting into earnings and the policy season, and it is fair that some money gets taken off the table,” Anand Tandon, an independent analyst, said in an interview to Bloomberg TV India. “You cannot have a one-way run forever.”

Oil & Natural Gas plunged 5.8 percent, paring this year’s gains to 42 percent. Reliance decreased 3.7 percent to 1,011.9 rupees. Indian Oil slumped 4.5 percent. Bharat Petroleum Corp. slid 2.3 percent and Hindustan Petroleum retreated 4.3 percent.

The previous government had approved a formula for almost doubling prices from $4.2 per million British thermal units, which was deferred from its scheduled date of April 1 because of elections that ended last month. The revision needs “comprehensive consultations,” Oil Minister Dharmendra Pradhan said yesterday in New Delhi.

Reform Expectations

“Some stocks had run up on expectation of reforms, and any news that disappoints on that front is being seen negatively,” Dhananjay Sinha, head of research at Mumbai-based Emkay Global Financial Services Ltd., said in an interview to Bloomberg TV India today.

The Sensex has surged 18 percent this year, the most among the world’s top 10 markets, fueled by overseas inflows of $9.85 billion. The government will present its first federal budget on July 10.

Modi faces a dilemma as he tries to balance the demands of explorers to raise gas prices and boost exploration with the need to stem inflation. Higher gas prices would boost the costs of running power and fertilizer plants, accelerating the rate of inflation that’s the second-highest in Asia.

State Bank of India, the nation’s biggest lender, declined 1.5 percent, while ICICI Bank Ltd. fell 1.3 percent. HDFC Bank Ltd. dropped 1.4 percent. Power generator NTPC Ltd. lost 2.9 percent, ending three days of advance

Overseas investors bought a net $6.2 million of shares on June 24, according to data compiled by Bloomberg.

The Sensex trades at 15.4 times projected 12-month profits, compared with the MSCI Emerging Markets Index’s multiple of 11.

Before it's here, it's on the Bloomberg Terminal.