Indian Stocks Reverse Gains as ICICI, Larsen Tumble on Earnings

  • ICICI Bank worst performer on Sensex after 1Q profit declines
  • Foreigners buy $1.7b of India shares in July, most since March

Indian stocks fell for a second day amid concern the rally that sent the benchmark index to a one-year high in early trade isn’t supported by growth in corporate earnings.

ICICI Bank Ltd., the nation’s largest private lender by assets, declined to its lowest price in almost a month after reporting a 25 percent drop in quarterly profit as provisions for bad debt rose. Larsen & Toubro Ltd. slid to its lowest price in a month after the biggest engineering company said investment climate still remains tepid. Drugmakers Lupin Ltd. and Cipla Ltd. were among worst performers on the S&P BSE Sensex.

The Sensex lost 0.2 percent at the close. The gauge had risen as much as 0.8 percent earlier amid growing optimism about the likely passage of the goods-and-services bill this week and as foreign funds remained net buyers of local shares. The index on Friday capped its fifth monthly gain, which pushed up its valuations to the highest in 15 months.

“The market could not sustain the higher level as results from ICICI Bank and Larsen & Toubro disappointed investors,” Dhiraj Bhutoria, a director at Varun Tradecom Pvt., a Kolkata-based brokerage, said by phone. “Stocks have rallied and earnings are not able to keep pace.”

ICICI Bank tumbled 5.1 percent, the steepest loss since April 5 and the worst performance on the Sensex. Larsen & Toubro, which reported a 46 percent jump in June-quarter profit, said domestic infrastructure order were delayed in the period as a recovery in investment is yet to gather pace. Both companies posted earnings after trading ended on Froday.

Foreigners have been net buyers of Indian shares every month since March, the quickest pace since November 2014, as above-normal rainfall improves the outlook for economic growth and corporate earnings after back-to-back drought. They bought $300 million of stocks on Thursday, the highest single-day inflow since March 31.

The rally has also been aided by optimism about the GST bill, which has been listed by the government for discussion and passage in the upper house of parliament this week. Investors are waiting to see if the government can overcome the objections of the main opposition Congress party and steer one of India’s biggest reforms into law in the current legislative session.

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