Indian Stocks Retreat for Fourth Day as Tata Steel Declines

  • Britannia slumps most in 18 years as profit misses forecast
  • ITC jumps most in three months on free-share plan; Citi rating

Indian stocks dropped for a fourth day in a volatile trading session as investors weighed the prospects for a U.S. interest-rate increase next month and its impact on capital flows.

Tata Steel Ltd. and Oil & Natural Gas Corp., the largest state-run explorer, were among the biggest losers on the S&P BSE Sensex. Lupin Ltd. led decline on a gauge of healthcare companies, which fell for a third day. Britannia Industries Ltd., the biggest biscuit maker by market value, slumped the most since June 1998 after its earnings missed estimates.

The Sensex slid 0.3 percent at the close, after changing direction at least 12 times. The NSE Nifty 50 Index lost 0.2 percent to 7,731.05. The indexes slid last week on concern the U.S. Federal Reserve may raise borrowing costs as early as next month. Higher rates in the U.S. would temper flows to emerging markets. Global funds have bought $271 million of Indian equities this month, down from $585 million in April and $4.1 billion in March, which was the biggest inflow in three years.

“The market is in a tight range, and any upside will be capped unless clarity emerges on the Fed interest rates and the monsoon’s progress,” Paras Bothra, a Mumbai-based vice president of equity research at Ashika Stock Broking Ltd., said by phone. “It will take a lot of good news for the Nifty to break the 8,000-mark.”

Odds of an interest-rate increase next month are now at 28 percent, up from 4 percent a week ago. Federal Reserve policy makers indicate a hike in June would be likely if the economy continues to improve. John Williams, president of the Fed Bank of San Francisco, said Sunday on Fox News the U.S. economy should be solid enough to merit raising rates in 2016.

Southwest monsoon has hit the Andaman and Nicobar island two days before its normal date, but a cyclone in the Bay of Bengal is likely to weaken its progress, likely delaying the onset of the four-month rainy season, the weather bureau said last week. The agency has predicted the monsoon to set over the southern Kerala state on June 7, a delay of six days from the normal onset date of June 1.

Tata Steel fell 2.8 percent in a third day of losses, while ONGC retreated the most since April 18. Drugmaker Lupin dropped 2.6 percent, extending Friday’s 9 percent slide that was triggered by a cut in revenue forecast for the year ending March 2018. Rival Cipla decreased 1.9 percent.

Britannia tumbled 8.5 percent. The company’s fourth-quarter profit of 1.9 billion rupees lagged behind the 2.19 billion rupees estimated by analysts. Sales of 21.9 billion rupees missed the 22.4-billion rupee estimate. The stock, which is not part of the Sensex, has surged 43 percent annually from Jan 1, 2009 through Dec. 31, 2015, versus the 18 percent yearly climb by the Sensex in the same period, data compiled by Bloomberg show.

Cigarette maker ITC Ltd., which has the third-highest weighting on the index, jumped the most in three months after announcing a plan to issue free shares. ITC said toward close of trade Friday that it will give a free share for every two held. The company also posted fourth-quarter net income of 25 billion rupees, matching the analysts estimate 25.2 billion rupees. Sales of 100.6 billion rupees beat the estimate 97.9 billion rupees.

The Sensex has fallen 3.4 percent this year and trades at 15.6 times 12-month forward earnings. That compares with 11.2 times for the MSCI Emerging Markets Index.

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