India's Sensex, Nifty Gauges Drop as Global Stock Rout Resumes

Updated on
  • Stocks across Asia fall after U.S. stocks enter correction
  • Volatility gauge jumps as much as 15%, headed for 2-year high

Indian shares dropped, with the key index set to complete two back-to-back weekly declines for the first time in more than four months. Stocks retreated across Asia as global equities resumed the rout that gripped them earlier this week after the S&P 500 Index entered a correction.

The benchmark S&P BSE Sensex fell 1.2 percent to 34,005.76 at close in Mumbai, extending its weekly drop to 3 percent. Private lenders ICICI Bank Ltd. and Yes Bank Ltd. led declines. As many as 12 of the 19 sector gauges compiled by BSE Ltd. retreated. The NSE Volatility Index surged 8.2 percent. 

Some investors welcomed the selloff as normal, seeing the rise in volatility as inevitable after a recent rally pushed Indian gauges to a string of record highs. The Sensex and NSE Nifty 50 Index were among the most expensive indexes in Asia before the decline, with their mid- and small-sized rivals trading at even higher valuations.

“After an extremely calm and stable market for a year or so, volatility is back and this healthy correction was much needed,” said Navneet Munot, chief investment officer at Mumbai-based SBI Funds Management Pvt. Locally the focus continues to be on how soon and how much the Indian economy and company profits recover, he said.

Earnings of the 50 Nifty members for the last three months of 2017 are expected to rise 29 percent from a year earlier, faster than the 16 percent in the previous quarter, according to data compiled by Bloomberg. Net income at 20 of the 40 Nifty companies that have reported so far have trailed analyst estimates.

The Sensex is trading at nearly 23 times its reported earnings, and the price-to-earnings ratio of S&P BSE MidCap Index is at 48. “Mid- and small-sized companies may bear most of the brunt in case of a selloff in equities as they have run up more over the last few years,” Munot said.

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