India Stocks Drop for Sixth Day as Sun Pharma Falls on Outlook

  • S&P BSE Sensex caps six-day losing streak on earnings concern
  • Sun Pharma slumps after saying annual profit will be impacted

Indian stocks dropped for a sixth day, its longest losing streak in about five months, as quarterly earnings at some of the largest companies missed forecasts and reports showed contraction in China’s manufacturing sector.

Sun Pharmaceutical Industries Ltd., the most valuable drugmaker, fell to a four-week low after saying growth in revenue and profit will be adversely impacted in the year ending in March. Larsen & Toubro Ltd., the top engineering company, decreased for a 10th day after paring its outlook on revenue growth last week. Bajaj Auto Ltd. was the worst performer on the S&P BSE Sensex after sales slid in October.

The Sensex slid 0.4 percent to 26,559.15 at the close, completing the longest stretch of losses since June. While 72 percent of its members that posted results for the September quarter have matched or beaten estimates, versus 60 percent in June, the gauge’s profits have risen just 2 percent over the previous quarter, data compiled by Bloomberg show. The index’s valuation climbed to 15.9 times projected 12-month earnings last week, the most expensive since August.

“Earnings are looking tired across most sectors, while valuations in some high-growth sectors like pharma and consumers are looking stretched,” Parag Thakkar, the head of institutional sales at HDFC Securities Ltd. in Mumbai, said in an interview to Bloomberg TV India. “Plus, there are concerns of a global slowdown in spite of the liquidity infusion. The stage isn’t set yet for good times.”

Bihar Election

Investors are also awaiting the results of the state election, due on Nov. 8, in Bihar. The polls are important for Prime Minister Narendra Modi’s efforts to control the upper house of parliament, where opposition parties have blocked key economic proposals including a nationwide sales tax. A win would give him momentum in about a dozen more state elections through 2017 that will determine control of the body.

Sun Pharmaceutical declined 2.7 percent to its lowest level since Sept. 29. That trimmed this year’s gain to 4.7 percent. Growth in revenue and profit will be “adversely impacted” due to temporary supply constraints at Halol plant and charges and expenses of Ranbaxy integration, according to an exchange filing Saturday.

Larsen & Toubro slid 1.6 percent, extending its 10-day loss to 13.5 percent. That’s the longest losing streak since December 2014. Hindalco Industries Ltd., an aluminum maker, slid 3.7 percent, while Tata Steel Ltd., the largest producer, tumbled 3.1 percent. The stocks were among the worst performers on a gauge of metal producers.

PMI Contracts

A gauge of manufacturing activity in India decreased to a 22-month low in October. The manufacturing purchasing managers’ index, prepared by Nikkei and Markit Economics, fell to 50.7, the lowest reading since December 2013, from 51.2 in September. In China, a private gauge of factory activity in October came in at 48.3, higher than the previous month’s reading but still below the 50 level that denotes the border between expansion and contraction.

Bajaj Auto tumbled 4.6 percent after sales tumbled 9 percent last month, while Indian Overseas Bank plunged 11 percent after reporting a second-quarter loss Saturday. 

Billionaire Anil Ambani’s Reliance Communications Ltd. rallied 6.3 percent, the most since Sept. 9, after it agreed to buy AFK Sistema’s Indian wireless unit in an all-stock deal that would create a carrier with 118 million subscribers.

The Sensex dropped 3 percent last week, paring a monthly advance, after global funds bought a net $989 million of Indian equities in October, bringing year-to-date inflows to $4.6 billion.

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