Sensex Ends Six-Day Gain as Reliance Drags India Oil Firms Lower

  • Sensex's 7-day relative strength index was 77, a sell signal
  • Investors awaiting start of earnings season next week

Indian stocks dropped as some investors judged the rally in the benchmark index to a six-week high had become excessive before the start of quarterly earnings season next week.

Reliance Industries Ltd., owner of the world’s largest refining complex, fell the most on the S&P BSE Sensex after a report that the company may face a 120-billion rupee ($1.8 billion) penalty from the government. GAIL India Ltd. fell for the first time this week. ITC Ltd., the biggest tobacco company, slid the most in five weeks. Lupin Ltd., a drugmaker, dropped for a fourth day after climbing to an all-time high last week. ICICI Bank Ltd. declined the most in a week.

The S&P BSE Sensex fell 0.7 percent to 26,845.81 at the close in Mumbai Thursday. The gauge had rallied 5.5 percent from Sept. 29 through Wednesday after the Reserve Bank of India cut its benchmark interest rate by more than economists’ forecast. Its seven-day relative strength index climbed above 70 on Tuesday. Some investors see a level above this reading as a signal to sell.

“The pause is just a technical halt,” R. K. Gupta, managing director of Taurus Asset Management Co., which has $640 million in assets, said by phone from New Delhi. “The market direction will depend on how the earnings season pans out.”

Profits for the 30 Sensex companies climbed 1 percent in the June quarter, following a 41 percent drop in the prior three months, data compiled by Bloomberg show. While analysts have reduced the estimates for fiscal 2016 profits by 13 percent since the start of April, they predict profits will grow 2.2 percent in the July-September period and 11 percent in the December quarter, the data show.

Reliance lost 2.7 percent, the most since Sept. 22. The company may have extracted 12 to 18 billion cubic meters of gas from block belonging to state-run explorer Oil & Natural Gas Corp. in KG basin, ET Now television channel reported, citing oil ministry officials it didn’t identify. ONGC was little changed.

GAIL India lost 2.4 percent, ending three days of advance. ITC fell 2.4 percent, the most since Sept. 1. Lupin slid 1 percent. ICICI Bank decreased the most since Sept. 24.

NTPC Ltd., India’s biggest power producer, fell 1.4 percent. Sun Pharmaceutical Industries Ltd., the most valuable drugmaker, lost 1.1 percent, ending five days of gains. Mahindra & Mahindra Ltd., a tractor maker, retreated 1.2 percent.

International investors were net buyers of Indian stocks for a fourth consecutive day on Oct. 6, the longest stretch of inflows since August. Foreigners have bought $3.8 billion of the nation’s shares this year, the most among eight Asian markets tracked by Bloomberg.

The Sensex has fallen 2.4 percent this year and trades at 15.6 times projected 12-month earnings, compared with the MSCI Emerging Markets Index’s multiple of 11.2.

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