India’s Sensex Drops for Fourth Day on Derivatives Expiry, Fed

  • U.S. Federal Reserve says considering rate increase this year
  • Overseas investors are net buyers of local shares for 12th day

India’s benchmark stock index slid to a two-month low, led by industrials and metal companies, as the monthly derivative contracts expired and the U.S. Federal Reserve signaled it’s prepared to raise interest rates in December.

Bharat Heavy Electricals Ltd., the largest power-equipment producer, tumbled the most in almost two months, while Coal India Ltd., the world’s biggest miner of the fuel, capped its biggest four-day loss in a month. Axis Bank Ltd. and State Bank of India paced losses among lenders. Dr. Reddy’s Laboratories Ltd., India’s third-biggest drugmaker by market value, climbed for the first time in three days before its results, while NTPC Ltd. slid for a third day even as the biggest power generator posted results that beat forecasts.

The S&P BSE Sensex slid 0.8 percent to 26,838.14 at the close in Mumbai in a fourth day of drop, the longest stretch of losses since August. The gauge has climbed 2.6 percent in October, on course for its best month since May, as overseas funds returned to emerging markets amid signals the Fed will delay raising borrowing costs until 2016. Those gains may evaporate if the inflows reverse after the U.S. central bank closes an unprecedented era of near-zero rates in December and Indian company earnings take longer to recover.

“Looks like a December rate hike by the U.S. Fed is pretty much on the cards,” Vaibhav Sanghavi, managing director at Ambit Investment Advisors Pvt. in Mumbai, said by phone. “Earnings have been a mixed bag so far, some good, some not so good.”

Results Scorecard

While 69 percent of the Sensex companies that have posted September-quarter results have matched or beaten estimates, versus with the 60 percent in the June quarter, earnings for the gauge are set to drop for a second quarter, data compiled by Bloomberg show.

Bharat Heavy tumbled 4.3 percent, the worst performer on the Sensex, while Coal India extended a three-day, 3.4 percent retreat.

Axis Bank lost 2.9 percent, extending Wednesday’s 7.5 percent loss. State Bank capped its biggest four-day loss since September.

Dr. Reddy’s said after market hours its second quarter rose 26 percent to 7.22 billion rupees, beating the 6.37 billion rupees estimated by analysts. The shares surged 2.6 percent.

NTPC’s second-quarter profit jumped 40 percent to 29 billion rupees ($445 million) from a year ago, beating the 20.2 billion rupees median of 19 estimates in a Bloomberg survey. The stock dropped 1.2 percent, extending the two-day, 2.6 percent decline.

Rollovers Climb

Meanwhile futures traders extended 74 percent of the October contracts at expiry, data as of 5:38 p.m. show. That’s higher than the six-month average of 66 percent. The India VIX index, the benchmark gauge of equity-option prices, jumped 3.2 percent to 17.6, taking this week’s advance to 8.6 percent.

Global funds sold $82.5 million of local stocks on Wednesday, ending 12 straight days of inflows which was the longest stretch since the period through March 9.

The Sensex has fallen 2.4 percent this year and trades at 15.6 times projected 12-month earnings. The MSCI Emerging Markets Index is valued at a multiple of 11.2.

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