Indian Stocks Drop From Eight-Month High as Rally Seen Overdone

  • GAIL, Power Grid lead drop among utilities; Bajaj, Hero slide
  • Foreigners bought $771m of shares in June, most since March

Indian stocks declined, led by two-wheeler makers and utilities, as some investors judged the benchmark index’s advance to an eight-month high was overdone.

GAIL India Ltd. and Power Grid Corp. were the biggest decliners on the S&P BSE Sensex. NTPC Ltd., the biggest power producer, fell the most in two weeks. Bharti Airtel Ltd., the largest mobile-phone operator, slid for the first time in four days. Hero MotoCorp Ltd. and Bajaj Auto Ltd., the largest motorcycle makers, dropped 1.6 percent each.

The Sensex slid 0.4 percent at the close in Mumbai, ending a six-day, 3.3 percent climb. The rally sent the gauge’s seven-day relative strength index to 71 Monday, a level some investors see as a signal to sell, and left 80 percent of the country’s top 100 companies trading above their 200-day moving average, the most since December 2014, according to data compiled by Bloomberg. Asian stocks dropped for the first time in a week as haven assets including the yen and sovereign bonds climbed.

“The decline is just consolidation and profit-booking by some investors,” Paras Bothra, a Mumbai-based vice president of equity research at Ashika Stock Broking Ltd., said by phone. “The market has shown great resilience after the Brexit vote. The mood is very positive. We’re advising clients to buy at every dip."

Fading prospects of a U.S. interest-rate increase and speculation that central banks will add to monetary stimulus in Europe and Japan helped global stocks recover the bulk of the declines that followed the U.K.’s June 23 vote. In India, the Sensex capped its best quarter since Prime Minister Narendra Modi’s election victory in May 2014, as his party eased rules on foreign direct investment, approved a new mining policy and said it would seek to pass the goods-and-services tax in the parliament session starting July 18.

The rally was aided by purchases of $771 million by global funds in June, a fourth month of net inflow, data compiled by Bloomberg show.

GAIL India plunged 2.6 percent, the steepest drop since May 19. Power Grid tumbled the most since Feb. 29 and NTPC declined the most since June 23.

Asset Sale

Bharti Airtel lost 2 percent. Hero MotoCorp fell for a second day and Bajaj Auto declined for a third day.

Jaiprakash Associates Ltd. jumped 27 percent after the builder of India’s only Formula One race track announced a higher valuation for the cement business it’s selling to Ultratech Cement Ltd. A higher sale price will help Jaiprakash pare debt that more than doubled to 753 billion rupees ($11.2 billion) in the five years through March 2015, before falling in the last fiscal, data compiled by Bloomberg show. Ultratech, the cement maker controlled by billionaire Kumar Mangalam Birla, decreased 1 percent.

The Sensex has advanced 4 percent this year and trades at 16.3 times projected 12-months profits, versus a five-year mean of 14.3 and a multiple of 11.9 for the MSCI Emerging Markets Index, data compiled by Bloomberg show.

The markets are closed for a public holiday on Wednesday.

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