Sensex Holds at 13-Month High as GDP Stokes Valuation Concern

  • Markets appear stretched, may pause for breath: Enoch Ventures
  • Bharti, Idea slump as Reliance Jio offers free mobile calls

Indian equities fluctuated after the gauge climbed to a 13-month high as a slowdown in the nation’s economic growth rekindled concerns on valuations.

Declines in metal producers and resources companies countered advances in makers of consumer goods, financial-services companies and utilities. The S&P BSE Sensex and the NSE Nifty 50 Index closed little changed after changing direction at least 20 times.

Index Change Level
Sensex -0.1%28,423.48
Nifty -0.1%8,774.65
S&P BSE MidCap-0.4% 13,166.87
S&P BSE SmallCap-0.4%12,598.98

Indian equities have climbed 24 percent from their February lows as a wave of global policy easing and the forecast of above-normal rain after a two-year drought lured foreign flows. Concerns about equity valuations that are near the highest in 16 months resurfaced after official data Monday evening showed the economy expanded at the slowest pace in more than a year.

“The market is looking fairly stretched at the index and could take a breather,” Vijay Chopra, managing director of New Delhi-based Enoch Ventures Pvt., said by phone. “The government should do some soul-searching and fast-track reforms to boost growth.”

Gross domestic product expanded 7.1 percent in April-June from a year earlier, weaker than the 7.6 percent median estimate in a Bloomberg survey of 36 economists. India still retains its spot as the world’s fastest-growing big economy, and the outlook has brightened after Prime Minister Narendra Modi in August broke a parliamentary logjam and paved the way for a landmark national sales tax.

Consumption is forecast to increase after a pay hike for federal employees and a revival in the July-September monsoon rains that are key to rural incomes.

“The 7.1 percent number is still an enviable number if you look at it from a global macro perspective,” Chopra said. He is advising investors to buy shares of chemical makers, paint companies and private lenders.

  • Reliance Industries Ltd., owner of the world’s largest refining complex, fell 2.9 percent after Billionaire Mukesh Ambani said his Reliance Jio Infocomm Ltd. unit will offer mobile phone calls for free, sparking a tariff war in what’s already one of the world’s lowest-priced wireless markets.

    Rival Bharti Airtel Ltd. plunged 6.3 percent, the most in four years, while Idea Cellular Ltd. sank 10.5 percent to its lowest price since October 2012.

  • Tata Motors Ltd., owner of Jaguar Land Rover, rose to a 16-month high. GAIL India Ltd. was the top performer on the Sensex.

  • Cement shares fell after the Competition Commission of India imposed penalties on 10 companies for cartelization. ACC Ltd. slid 1.3 percent. Binani Industries Ltd. fell 2.9 percent. Jaiprakash Associates Ltd. tumbled 3.9 percent.

    Cement companies used Cement Manufacturers Association and shared details relating to prices, capacity utilization, production and dispatch, antitrust body Competition Commission of India said in a statement Wednesday. 

  • Hindustan Construction Co. soared 19 percent, extending Wednesday’s 20 percent jump. The company expects 58 billion rupees on settling claims with state agencies over the next 18 months, chairman Ajit Gulabchand said in phone interview.

    Punj Lloyd Ltd. surged 4.3 percent, taking this week’s gains to 16 percent. Construction companies rose for second day after the government announced measure to lessen their debt burden. 

The Sensex is up 8.8 percent this year and is valued at 16.3 times projected 12-month earnings, near the highest level since April 2015. The MSCI Emerging Markets Index is valued at a multiple of 12.4, data compiled by Bloomberg show.

Foreigners have bought $5.9 billion into local stocks since Jan. 1, surpassing last year’s $3.3 billion.

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