India’s Sensex Extends Last Week’s Retreat as ICICI Bank Tumbles

  • Asian selloff saps demand as yen near 18-month high; oil drops
  • FIIs buy $588m of shares in April after $4.1b inflow in March

Indian stocks declined, extending last week’s retreat, as a selloff in Asian stocks sapped demand for riskier assets.

Bharti Airtel Ltd., India’s largest mobile-phone operator, slid for a third day. ICICI Bank Ltd., the country’s biggest private lender, was the top loser on the S&P BSE Sensex. ITC Ltd. declined to a one-week low. Dr Reddy’s Laboratories Ltd. and Adani Ports & Special Economic Zone Ltd fell more than 2 percent each.

The Sensex lost 0.7 percent to 25,436.97 at the close in Mumbai. The gauge has risen 11 percent from a February low as the risk-on sentiment returned to Asia. Foreigners bought $588 million of local shares last month, adding to March’s inflow of $4.1 billion, which was the most in three years. The yen soared almost 5 percent on the final two trading days in April as the Bank of Japan unexpectedly refrained from boosting stimulus amid fading prospects for a U.S. interest-rate increase in June or July.

“It’s the reversal of the yen-carry trade happening because of what Bank of Japan did," Mehraboon Irani, head of private-client group at Nirmal Bang Securities Ltd., said in an interview with Bloomberg TV India. About “75 percent of the rise which Indian markets saw was due to global factors. If there’s a little bit of global uncertainty, there is a distinct possibility we may fall off. However, India remains a buy on dips market."

While a weakening dollar helped boost commodity prices in April by the most since 2010, the global stocks’ rebound from a three-year low in February is stumbling as economic data and corporate earnings do little to lift investor sentiment. U.S. consumer spending rose less than economists forecast in March, data showed Friday, wrapping up the weakest quarter in a year for the biggest part of the nation’s economy.

Locally, investors are focused on the ongoing quarterly earnings season to look for signs of economic growth filtering through to company bottom lines. Profits have dropped in four of the past five quarters in the worst run since the global financial crisis. So far in this reporting season, six out of 10 Sensex companies that have reported March-quarter results beat or matched analyst estimates.

Asset Quality

Bharti Airtel declined 1.6 percent to its lowest level since April 22. ITC dropped 1.2 percent. Dr Reddy’s Laboratories tumbled 2.5 percent, the most since March 29. Adani Ports retreated 2.2 percent.

ICICI Bank plunged 4.3 percent, extending last week’s 6 percent slide. On Friday, the lender said its fourth-quarter profit sank 75 percent to 7 billion rupees ($105 million) as it set aside 36 billion rupees as buffer for possible defaults.

Religare Capital Mkts Ltd. reiterated its sell recommendations on the stock and said it it could fall as much as 20 percent as the asset quality disclosures “do not materially ease concerns," analyst Parag Jariwala and Vikesh Mehta wrote in a note Monday.

Foreign investors bought $36 million of local stocks on April 28, taking this year’s inflows to $1.8 billion. The Sensex has retreated 2.6 percent this year and trades at 15.6 times 12-month projected earnings versus 11.7 for the MSCI Emerging Markets Index.

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