Sensex Falls Most in Five Months as Indian Market Leaders Sink

Indian stocks tumbled the most in five months, led by this year’s best-performing companies, as investors speculated the gains that sent the benchmark index to a record high have gone too far.

The S&P BSE Sensex retreated 2 percent to 25,582.11 at the close in Mumbai, the most among benchmark indexes in Asia, after closing at record levels in the previous two trading days. Bharat Heavy Electricals Ltd., India’s biggest power-equipment maker, fell the most in about 11 months. State Bank of India paced losses among its peers after Standard & Poor’s said the recovery for lenders is likely to be gradual.

“Markets are seeing profit booking as the rally was very sharp,” Aneesh Srivastava, chief investment officer with IDBI Federal Life Insurance Co., said by phone from Mumbai. “The railway budget was positive, and it seems some traders are selling as the event is behind us.”

Indian stocks have added $206 billion of market value since Prime Minister Narendra Modi led his party to the biggest election victory in three decades in May. Modi’s administration presented its first railway budget today and will unveil its national spending plans on July 10.

The Sensex has surged 21 percent this year, the best performer among the world’s 10 biggest markets, and is valued at 16 times projected 12-month profits, the most expensive level in more than three years. The MSCI Emerging Markets Index is trading at a multiple of 11.

L&T, ONGC Drop

Bharat Heavy declined 8.3 percent, paring its year-to-date gains to 37 percent. Larsen & Toubro Ltd., the best performer on the Sensex this year, tumbled 4.4 percent, reducing this year’s increase to 56 percent. State Bank of India fell 4.1 percent, cutting 2014’s advance to 46 percent.

Oil & Natural Gas Corp., India’s largest state-owned oil explorer, lost 4.5 percent. NTPC Ltd., India’s biggest power producer, fell 5.2 percent.

Texmaco Rail & Engineering Ltd. tumbled by the limit 20 percent, while Kalindee Rail Nirman (Engineers) Ltd. slipped 5 percent. Texmaco had soared 237 percent this year through yesterday, while Kalindee jumped 82 percent. Titagarh Wagons Ltd., which manufactures railroad cars, had surged 193 percent before dropping by 5 percent today.

“The stocks which had seen big run ups are seeing the most declines,” Deven Choksey, managing director of Mumbai-based K.R. Choksey Shares & Securities Ltd., said by phone.

Railway Rout

Railway Minister Sadananda Gowda today said foreigners will be allowed to invest in railroad infrastructure. He announced a high-speed train from to connect the financial hub of Mumbai with Ahmedabad in the western Gujarat state and pared back borrowings to repair the financial health of Asia’s oldest network.

The proposals have the potential to bring in investments from companies such as General Electric Co. and Bombardier Inc. as Modi aims to fix the nation’s creaky infrastructure with new high-speed trains and urban-transport services.

Indian Railways last month raised passenger and freight fares, giving Modi room to cut subsidies after he said he’s ready to take unpopular steps to improve fiscal health in Asia’s third-largest economy.

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