India Stocks Drop for Second Day as Lupin Falls Most Since 2008

  • Lupin slump drags BSE Healthcare Index to two-month low
  • Sensex headed for best month since October 2013 on inflows

Indian stocks fell for a second day in volatile trading as drugmakers countered advances in automakers before the expiry of the monthly derivatives series on Thursday.

Lupin Ltd. slumped to a 14-month low after an analyst report said that inspectors from the U.S. Food and Drug Administration had flagged failings at one of the drugmaker’s key factories. Rival Cipla Ltd. slid to its lowest price in 19 months and Sun Pharmaceutical Industries Ltd. dropped to a two-month low. Maruti Suzuki India Ltd. surged the most in three weeks, while Tata Motors Ltd. was the best performer on the Sensex.

The S&P BSE Sensex dropped 0.3 percent at the close in Mumbai after changing direction at least 10 times. The index slid the most in a month on Monday before a monetary policy review next week and the end of the monthly derivatives series on Thursday. The gauge is still set for its best month since October 2013 as Finance Minister Arun Jaitley’s pledge to further cut the fiscal gap stoked speculation of an interest-rate reduction and spurred capital inflows. The Reserve Bank of India will review rates on April 5.

“Markets will continue to be volatile as defensive stocks like the drugmakers are under pressure,” R.K. Gupta, managing director of Taurus Asset Management Co., which has $520 million, said by phone from New Delhi. “Traders are cautious before the expiry Thursday and the RBI policy next week. March-quarter results and the onset of the monsoon will play a key role for markets in the near term.”

Benign Observation

Lupin tumbled 6.3 percent to 1,401.6 rupees. The company’s Mandideep unit in India was inspected by the U.S. FDA in February, according to a note sent by IIFL to its clients and seen by Bloomberg. Shares of India’s second-biggest drugmaker by market value pared some of their losses after saying observations made by the U.S. Food and Drug Administration on one of its key factories were “minor in nature.”

The FDA’s observations have been classified as voluntary action initiated, “which is generally benign and does not escalate into warning letter,” Morgan Stanley analysts Sameer Baisiwala and Vaibhav Dusad wrote in an investor note, citing Lupin’s management. The brokerage maintained its overweight rating on the stock with a 12-month price target of 2,133 rupees.

Rivals Sun Pharmaceutical Industries Ltd., Cipla Ltd. and Dr. Reddy’s Laboratories Ltd. were among the worst performers on the Sensex. A gauge of 63 health-care companies tumbled 2.6 percent, the lowest level since January 2015, and was the biggest decliner among the 13 sectoral indexes compiled by the BSE Ltd.

Foreign inflows have picked up, buoyed by easing of volatility in the global markets and prospect of lower borrowing costs. Foreigners have bought $2.7 billion of Indian shares since March 1. The inflows helped fuel an 8 percent gain in the Sensex so far this month, the best performance since October 2013.

The Sensex has fallen 4.7 percent this year and trades at 15.2 times 12-month projected earnings. The MSCI Emerging Markets Index is valued at a multiple of 11.6.

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