India Stocks Fall From 1-Year High as ICICI Drops Before Results

  • Most Asian equities decline on Bank of Japan’s policy measures
  • Foreigners buy $1.7b of India shares in July, most since March

Indian stocks dropped, paring a monthly advance, amid concern that the recent rally may have outpaced the outlook for earnings growth and as most Asian equities decreased after the Bank of Japan’s policy decision.

ICICI Bank Ltd. had the steepest fall in more than a month before its earnings, the worst performance on the S&P BSE Sensex. Bharti Airtel Ltd. decreased the most in two weeks. Larsen & Toubro Ltd., the nation’s engineering firm, retreated for a second day before its June-quarter results.

The Sensex declined 0.6 percent at the close, falling from a one-year high reached on Thursday. The gauge has rallied 4 percent this month, pushing up its valuations to a 15-month high. That leaves little room for further upside if corporate earnings disappoint, according Taurus Asset Management Co.

“Stocks are not going to go up fast as earnings are not coming along and valuations are stretched,” R. K. Gupta, managing director of Taurus, which oversees $590 million, said by phone from New Delhi. “There’s also a bit of disappointment from the size of Japan’s stimulus.” Gupta is advising clients to buy stocks on declines.

The BOJ almost doubled its target for purchases of exchange-traded funds to 6 trillion yen ($58 billion) and expanded a dollar-lending program to $24 billion. The authority kept its annual target for enhancing the monetary base at 80 trillion yen, done mainly through an equivalent increase in government bond holdings. The stimulus wasn’t as much as most analysts had been expecting.

Indian equities capped their biggest monthly climb since May as foreign funds extended their purchases of local shares and optimism that the national sales tax bill, the nation’s biggest economic reform in decades, will be passed by parliament soon bolstered investor sentiment. Global funds bought $300 million of stocks on Thursday, the highest single-day inflow since March 31, taking the month’s inflow to $1.7 billion.

The Sensex trades at 16.4 times 12-month projected earnings, the most expensive level in 15 months.

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