Sensex Drops After Biggest Gain in Year as State Bank Retreats

  • SBI worst Sensex stock after chairman's bad-loan outlook
  • Global funds remain net sellers for 10th straight day

Indian stocks slumped after the benchmark gauge’s steepest rally in a year Monday failed to assure investors the worst was over for equities and foreign funds remained sellers.

State Bank of India was the worst performer on the S&P BSE Sensex after chairman Arundhati Bhattacharya said bad loans are likely to increase next quarter and may affect profits. Larsen & Toubro Ltd. fell after its steepest gain in six years, while Tata Motors Ltd. tumbled 5.1 percent. Coal India Ltd., the world’s largest miner of the fuel, dropped after surging 7 percent on Monday. 

The S&P BSE Sensex lost 1.5 percent at the close in Mumbai, erasing an intraday gain of 0.6 percent. The measure rallied 2.5 percent on Monday, rebounding from its worst week since 2009, after entering a bear market this month. Overseas investors sold a net $165 million of Indian stocks on Feb. 15, taking this year’s outflow to $2.3 billion as they turn averse to riskier emerging-market assets.

“Yesterday’s rally was due to short-covering in an otherwise bear market, and investors are still not sure of the direction,” Abhimanyu Sofat, Mumbai-based co-founder of AdviseSure Ventures Pvt., an investment advisory firm, said by phone. “It is still a sell-on-rally market. I would like to see more stability before telling clients to bottom-fish.”

Global funds are set to remain net sellers of Indian equities for a second month in a row. They withdrew $1.7 billion from local shares in January after buying $3.3 billion of stocks last year, the smallest amount since 2011.

Bharat Petroleum Ltd. paced losses among state-owned refiners after oil prices climbed. The stock tumbled 3.7 percent to its lowest close in more than eight months. Indian Oil Corp. lost 2.8 percent and Hindustan Petroleum Corp. dropped 5.1 percent. Brent crude rose 2 percent after Saudi Arabia and Russia, the world’s two largest producers, agreed to freeze output after talks in Qatar.

State Bank slumped 6.8 percent, the most since August. Tata Motors decreased 5.1 percent to 301.2 rupees while Larsen dropped 4 percent to 1,104 rupees. Coal India fell 2 percent to 317.9 rupees.

The Sensex has plunged 11 percent this year and trades at 14.5 times its projected 12-month earnings, near the cheapest since May 2014.

“Asset prices may not go down much as they have adjusted to the fact that growth is going to be slower than what most analysts expect,” Madhav Dhar, a New Delhi-based managing partner at GTI Capital Group, an India-focused investment firm, said in an interview with Bloomberg TV India on Tuesday. “As a contrarian, value-driven investor, I’m encouraged to put money back in and probably invest more if it gets worse.”

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