India Stocks Pare Weekly Climb as Inflows Spur Valuation Concern

  • BOJ, U.S. Fed moves ease investor concerns about liquidity
  • Sensex heads for quarterly gains as small caps rise to record

Indian stocks dropped, with the benchmark index paring a weekly gain, as concerns about equity valuations resurfaced after global funds extended their purchases of local assets.

Foreigners bought $610 million of shares this week, the most since a similar period ended July 29, as global central bank stayed supportive of growth. They’ve bought $4 billion of the nation’s equities this quarter, putting stock gauges on course for their first quarterly climb since March 2015.

Nifty 50-0.4%8,831.55
S&P BSE MidCap+0.3%13,331.97
S&P BSE SmallCap+0.1%Record

The Sensex is valued at 16.4 times projected 12-month earnings, near the most expensive level since January 2011, after rebounding 25 percent from a low reached in February. A gauge for medium-sized companies trades at 33 times reported earnings, higher than the five-year mean of 21. The 12-month trailing price-earnings ratio for the S&P BSE SmallCap Index is a record 80.5 times.

“The concern on global liquidity has eased but the worry is on valuation,” Chokkalingam G., managing director at Mumbai-based Equinomics Research & Advisory Pvt., said by phone. “We’re advising clients to book profits in small- and mid-cap stocks, where valuations have become rich, and move into index stocks.”

Global stocks, bonds and commodities rose this week and the dollar weakened as the Federal Reserve scaled back its tightening plans and the Bank of Japan strengthened its commitment to reviving inflation. Indonesia cut rates for the fifth time this year, while New Zealand’s central bank signaled further easing. Lower borrowing costs in the U.S. and other developed nations have bolstered demand for emerging-market assets.

  • Axis Bank Ltd. plunged 5.8 percent, the most since Jan. 17. The stock was the worst performer on the Sensex. 

  • Lupin Ltd. slid 2.6 percent in a third day of decline. Infosys Ltd., the second-largest software services provider, fell to a one-week low.

  • Reliance Industries Ltd., owner of the world’s largest refining complex, rose 1.3 percent to its highest level since June 2014.

  • Morepen Laboratories Ltd. climbed the most in three weeks after the Times of India newspaper reported that the company is planning to sell its over-the-counter brands. 

  • Bharat Financial Inclusion Ltd. rose to a two-month high after ET Now reported its 7.5 billion rupees ($123 million) share sale has been oversubscribed. 

  • Adlabs Entertainment Ltd. rallied 20 percent, the most since April 2015.

  • Oil & Natural Gas Corp. and Tata Steel Ltd. were the biggest gainers this week on the Sensex. Other notable gainers over the five days include GTL Infrastructure Ltd., which jumped 59 percent, Shreyas Shipping & Logistics Ltd., up 30 percent, and Prabhat Dairy Ltd., which soared 25 percent.

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