India’s Sensex Retreats Most in a Month as Rally Seen Overdone

Indian stocks declined the most in five weeks amid concern the rally that pushed up the benchmark index to a record has exceed the outlook for earnings.

Tata Motors Ltd., owner of Jaguar Land Rover, dropped the most in three weeks. Bharat Heavy Electricals Ltd. decreased for the first time this week. Steel Authority of India Ltd. had the biggest loss in two weeks, while Tata Steel Ltd. was the worst performer on the S&P BSE Sensex. India VIX, the benchmark gauge of option prices, rebounded from an all-time low intraday.

The Sensex lost 0.5 percent to 28,032.85 at the close, retreating from intraday gains. The gauge has closed at an all-time high five times this month as foreigners bought $1.5 billion of shares amid optimism the central bank may lower interest rates as inflation slows. Its 14-day relative-strength index stayed above 70, seen an overbought threshold by some investors, on 10 of the past 11 days.

“Some investors are taking money off the table as there are no immediate triggers,” Deven Choksey, managing director at K.R. Choksey Shares & Securities Pvt., said by phone in Mumbai. “The market is evenly poised between those who believe a rate cut will happen on Dec. 2 or it won’t happen.”

The Reserve Bank of India reviews monetary policy on Dec. 2. Finance Minister Arun Jaitley said Nov. 17 that a reduction in borrowing costs would give a “good fillip” to the economy, according to a report by the Press Trust of India.

Governor Raghuram Rajan raised the main repurchase rate three times from September 2013 through January to curb retail inflation. Consumer prices rose at the slowest pace since at least January 2012 last month, while wholesale price inflation was at the lowest since September 2009, data last week showed.

Interest Rates

“Interest rates are headed downward, whether it happens in December or in February,” Parag Thakkar, head of institutional sales at HDFC Securities Ltd., told Bloomberg TV India today.

Tata Motors slid 2.2 percent. Mahindra & Mahindra Ltd., the largest maker of sport-utility vehicles and tractors, lost 1.6 percent, the most since Nov. 3. Bharat Heavy dropped 2 percent, trimming this year’s gain to 41 percent.

Steel Authority fell 2.4 percent, while Tata Steel tumbled 3.2 percent, ending a four-day rally. The S&P BSE Metal index retreated 2.1 percent.

The S&P BSE Sensex is the best performer among the world’s 30 biggest markets this year as foreigners have bought $15.4 billion of shares, the most among Asian markets tracked by Bloomberg, on bets Prime Minister Narendra Modi will take steps to bolster growth. The Sensex is valued at 15.6 times projected 12-month profits, versus with the MSCI Emerging Markets Index’s multiple of 11, data compiled by Bloomberg show.

‘Great Start’

Modi has made a “great start” on removing constraints on the economy and entrepreneurs are showing more confidence, Gunit Chadha, Deutsche Bank AG’s Asia Pacific co-chief executive officer, said in an interview to Bloomberg TV today.

The government is in talks with the opposition on land acquisition changes and will introduce a constitutional amendment to create a goods and services tax in the winter session of parliament beginning Nov. 24, Bloomberg TV India reported Nov. 17, citing Finance Minister Jaitley.

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