Indian Stocks Retreat for Second Week as Bihar Results Awaited

  • Average of six exit polls show a dead heat in Bihar election
  • Dr. Reddy’s tumbles most in 11 years on U.S. FDA warning

Indian stocks dropped, with the benchmark gauge capping a second week of losses, as investors awaited the result of a key state election.

Dr. Reddy’s Laboratories Ltd. plunged the most in 11 years after receiving a warning letter from the U.S. Food and Drug Administration over manufacturing facilities making pharmaceutical ingredients and oncology products. Tata Steel Ltd. tumbled the most in five weeks after its sales missed estimates. Vedanta Ltd., the largest copper producer, dropped to a five-week low.

The S&P BSE Sensex lost 0.2 percent to 26,265.24 at the close in Mumbai, after changing direction at least 20 times. The gauge fell 1.5 percent this week as some earnings reports disappointed investors and voting concluded in Bihar on Thursday. Four exit polls showed Modi’s opponents winning the most seats, while two polls showed him in front. The winner will be announced when ballots are counted on Sunday.

The Bihar results “can have a knee-jerk reaction of 100-plus points either side depending upon the verdict,” Daljeet Kohli, head of research at India Nivesh Securities Pvt., said in an interview with Bloomberg TV India. “As of now, the outlook is as confused as before; don’t know which way it will go." Kohli is advising investors to buy Tata Motors Ltd. as he expects the stock to climb 25 percent over the next 12 months.

FDA Warning

Dr. Reddy’s, India’s second largest drugmaker, plunged the most since March 2004. The warning letter from the U.S. FDA was related to the company’s facilities making active pharmaceutical ingredients in Srikakulam, Andhra Pradesh and Miryalaguda, Telangana in southern India, as well as an oncology products facility, the company said in a statement.

Tata Steel shares tumbled 2.3 percent, taking this year’s loss to 45 percent. The company said after market hours on Thursday that its second-quarter profit climbed 22 percent to 15.3 billion rupees as India’s biggest producer sold shares in group companies. Sales of 293 billion rupees missed forecasts. The shares tumbled 2.3 percent, extending this year’s loss to 45 percent. Vedanta declined 2 percent.

State Bank of India rallied the most in more than two months after reporting profit that beat estimates. The largest lender by assets posted a 25 percent increase in profit to 38.8 billion rupees. Gross bad-loan ratio narrowed to 4.15 percent from 4.29 percent in June, in contrast to rivals Bank of Baroda and ICICI Bank Ltd., which reported increased ratios for the September quarter.

Unexpected Loss

Tata Motors Ltd., owner of Jaguar Land Rover, declined 1.9 percent. The company posted after market hours an unexpected loss of 4.3 billion rupees ($65 million) in the quarter ended Sept. 30, compared with a profit of 32.9 billion rupees a year earlier. Jaguar Land Rover retail sales plunged 32 percent in China and Tata Motors took a one-time charge on damages to the vehicles of its luxury unit from a blast at Tianjin port where they were stored, according to an exchange filing.

Cipla Ltd., a drugmaker, reported after market hours on Thursday profit that climbed 44 percent to 4.31 billion rupees, missing the median estimate of 4.88 billion rupees. The shares were unchanged. Bharat Heavy Electricals Ltd., the biggest power-equipment maker, slid 1.5 percent. The company reported an unexpected loss of 2.05 billion rupees, missing the estimated 1.72 billion profit.

Sales at Sensex firms that have posted September-quarter results so far have declined 10 percent even as profits have increased 3.6 percent from a year earlier, data compiled by Bloomberg show. Sixteen of the 24 index members, or 67 percent, that have reported earnings have matched or beaten estimates, data compiled by Bloomberg show.

International investors bought a net $10.3 million of Indian stocks on Nov. 4, taking this year’s inflow to $4.3 billion.

The Sensex has fallen 4.5 percent this year and trades at 15.4 times projected 12-month earnings, compared with the MSCI Emerging Markets Index’s multiple of 11.3.

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