India’s Sensex Falls to Five-Week Low Before Bihar Poll Results

  • Modi win gives him momentum, a loss may weaken economic agenda
  • Ashok Leyand net lags forecast; Tata Steel, Cipla to report

Indian stocks dropped the most in five weeks low as investors await the results of a key state election.

Vedanta Ltd., the largest copper producer, fell to a one-month low, while Tata Steel Ltd. slipped for a fifth day before its earnings. Ashok Leyland Ltd. tumbled the most in more than two months after its profit missed estimates. Bharti Airtel Ltd., the largest mobile-phone operator, decreased the most in two weeks.

The S&P BSE Sensex lost 0.9 percent to 26,304.20, its lowest close since Oct. 1. The drop was the steepest since Sept. 28. The gauge has fallen in eight of the past nine sessions as results at some of the biggest companies missed forecasts and investor attention turned to Bihar state elections, which conclude Thursday. The polls are crucial for Prime Minister Narendra Modi’s efforts to control the upper house of parliament, where opposition parties have blocked economic proposals.

“The market is not very optimistic of the chances of the ruling National Democratic Alliance and that’s why we are seeing some selling pressure," K. Subramanyam, co-head of equity advisory at Altamount Capital Management Pvt., said by phone in Mumbai. “Even if the NDA doesn’t win, the extent of the defeat matters a lot. If it’s just a few seats here and there, the market might digest it. But if it’s a landslide for the other side, then it will be serious.” He is advising investors to buy shares of entertainment, media companies, breweries, software exporters and state-run banks.

Modi has invested himself heavily in the election campaign. Over the past four months he addressed about 30 rallies in Bihar, one of India’s least developed states where about 100 million people live and the average income is less than $2 a day. A win could give Modi momentum in about a dozen more state elections through 2017 that will determine control of the body. The last phase of voting ends at 5 p.m. and exit polls are due post that.

Earnings Report

Tata Steel is forecast to report today a second-quarter loss of 959 million rupees ($14.6 million), compared with a profit of 12.54 billion rupees a year earlier, according to the median estimate of 8 analysts in a Bloomberg survey. The shares dropped 4.3 percent in a fifth day of decline, the longest losing streak since July.

Cipla Ltd., a drugmaker, is estimated to report net income rose 63 percent to 4.88 billion rupees, according to 23 analysts in a Bloomberg survey. The shares dropped 1.9 percent.

Sales at Sensex firms that have posted September-quarter results so far have declined 12 percent even as net incomes have risen 2.4 percent, data compiled by Bloomberg show. Thirteen of the 19 index members that have reported earnings have matched or beaten estimates, data compiled by Bloomberg show.

“Earnings were not expected to be great this quarter," Subramanyam said. “We are focusing on management commentary and taking cues from there rather than looking at just the numbers.”

Vedanta tumbled 4.7 percent to its lowest since Oct. 8. Ashok Leyland plunged 5.9 percent, paring this year’s rally to 69 percent. The truckmaker posted profit of 2.87 billion rupees, missing the estimated 3.34 billion rupees. Bharti Airtel tumbled 2.8 percent.

International investors sold a net $57 million of Indian stocks on Nov. 3, reducing this year’s inflow to $4.3 billion, the second-highest among eight Asian markets tracked by Bloomberg, after Taiwan. The Sensex has fallen 4.4 percent this year and trades at 15.4 times projected earnings, versus the MSCI Emerging Markets Index’s multiple of 11.5.

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