Sensex Suffers Worst Week in 18 Months on Earnings Misses

  • Biggest India Lender Slumps as Bad-Loan Surprise Hits Profit
  • Earnings from Union Bank, Power Finance miss estimates

India’s equities benchmark posted its worst week in 18 months as a string of disappointing corporate profits deflated the rally that’s helped stocks break multiple records this year.

The 30-member S&P BSE Sensex fell 1 percent to close at 31,213.59 in Mumbai, dropping for the fifth consecutive day. The measure posted a 3.4 percent weekly retreat, the biggest since February 2016, and has erased almost all of its advance last month. Seventeen of 19 sector indexes compiled by BSE Ltd. fell.

State-run State Bank of India, Union Bank of India and Power Finance Corp. fell after missing estimates, following the tone set earlier this week by the country’s biggest auto and drug makers. 

State Bank of India, the country’s largest lender by assets, fell 5.4 percent after reporting a surprise jump in bad loans, depressing profits. Net income dropped 20 percent to 20 billion rupees, short of the 29.6 billion-rupee mean estimate of analysts surveyed by Bloomberg. Mahindra & Mahindra Ltd. and Reliance Industries Ltd. were among other top losers on the Sensex.

“Earnings commentary, especially in the second half, continues to worry investors,” said Nilesh Dedhia, director at NTD Trading Ltd., referring to the latter part of the local earnings season. “Markets are building ammunition for next leg of rally after a bout of healthy profit taking.”

That may come with more volatility. The India VIX index advanced for a fifth straight day and climbed 10 percent to 15.2, trading at the highest since January. The measure’s American counterpart climbed to a level last seen in November as U.S. President Donald Trump escalated his rhetoric on North Korea.

In India, earnings may continue to be a drag on markets. Analysts, on average, have reduced profit estimates for Sensex companies 2.2 percent in the past month, according to Sanjay Kadam, an analyst at Nomura Financial Advisory and Securities (India) Pvt.

Summary

  • Union Bank declines 4.8%
  • Power Finance falls 5.5% after 1Q net income misses estimates
  • IFCI slumps 4.8% after 1Q loss widens Y/y

— With assistance by Abhishek Vishnoi

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