Indian Stocks Slide to 19-Month Low as Mahindra Drops Amid China

  • Asian equities retreat as China inflation data sparks concern
  • Reliance rallies to 18-month high amid earnings outlook

India’s benchmark index extended its steepest weekly loss in four years amid concern over China’s growth outlook and as investors awaited Tata Consultancy Services Ltd.’s earnings report on Tuesday.

State Bank of India slumped for a sixth day, while Mahindra & Mahindra Ltd., the top tractor maker, dropped to a four-month low. Tata Consultancy, India’s most valuable company, lost 1.4 percent before it kicks off the December-quarter earnings season for S&P BSE Sensex companies. Reliance Industries Ltd., owner of the world’s largest refining complex, rallied to an 18-month high.

The Sensex slid 0.4 percent to its lowest close since June 2012. The gauge has erased nearly all gains recorded after Prime Minister Narendra Modi’s party swept to power in May 2014, as euphoria over his economic agenda waned. The Shanghai Composite Index tumbled 5.3 percent, extending last week’s 10 percent slump, after a record 46th month of falling factory-gate prices in December fueled pessimism over the economy.

“It’s a low-return world and equity, like other asset classes, will find it tough to generate returns,” Ridham Desai, head of India research at Morgan Stanley, said in an interview with Bloomberg TV India in Mumbai. “India has lost its beta but it will still outperform its emerging-market peers.”

Capital Outflows

The Sensex slid 5 percent last year, after rising 30 percent in 2014, as overseas funds bought $3.3 billion of shares last year, the least in four years. Foreigners have pulled $239 million from Indian equities since Jan. 1, compared with $902 million from South Korea, $1.2 billion from Taiwan and $232 million from Thailand.

“Investors recognize India’s long-term position as well as its short policy traction and have rewarded it accordingly,” Desai said. “Emerging markets have seen outflows to the tune of $80 billion, while India received inflows” last year, he said.

The Sensex trades at 14.9 times its projected 12-month profits, compared with a multiple of 10.4 for the MSCI Emerging Markets Index. Fifty-seven percent of Sensex companies matched or exceeded estimates in the September quarter versus 60 percent in the three months ended June, data compiled by Bloomberg show.

Reliance Profit Growth YoY

Reliance Industries gained 2.5 percent to its highest price since June 2014 on expectation that higher oil-refining margins will boost profit of the nation’s second-biggest company by market value. Earnings for the three months ended Dec. 31 are expected to climb the most in 11 quarters, according to estimates compiled by Bloomberg.

The stock “is also under-owned and institutions, who are buying the stock to generate higher returns,” Rajendra Wadher, a director at PRB Securities Ltd., said by phone from Mumbai.

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