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India’s benchmark stock index fell for a third day as Larsen & Toubro tumbled after posting fourth-quarter earnings that missed analysts’ estimates.
The S&P BSE Sensex dropped 0.3% to 20,062.24 at the close in Mumbai, its longest losing run since April 9. Larsen plunged 5.7%, the most since January 2010, as profit at India’s biggest engineering company slid 6.8% to Rs17.9bn ($322mn) in the three months ended March. Reliance Industries, the owner of the world’s largest refining complex, retreated for a fourth day.
The Sensex capped a fifth straight week of gains on May 17, rising to its highest level since January 5, 2011. The gauge has rebounded 10% since falling to a seven-month low on April 9, as foreign funds boosted equity purchases amid easing by global central banks. Foreigners were net buyers of Indian stocks for a 22nd day on May 20, the longest such run since the 35 days through February 15, data from the market regulator show.
“The market had climbed too much, too fast and Larsen’s results gave people a reason to sell,” Jitendra Panda, head of broking at Capital First in Mumbai, said by telephone. “Liquidity has been the sole driver over the past few weeks.”
Larsen sank 5.7% to Rs1,513.90, the biggest drag on the Sensex yesterday. Profit trailed the Rs18.8bn median estimate in a Bloomberg survey. Sales increased to Rs203bn from Rs185bn, according to Larsen’s statement. That trailed the Rs211.3bn median estimate.
Reliance lost 1.2% to Rs818.75. Motorcycle maker Hero MotoCorp slid 2%, the most in more than a month, to Rs1,650.35. Bharat Heavy Electricals lost 1.1% to Rs203.75, ending a five-day rally. India’s largest power-equipment maker reports results today.
Profit at just three of the 18 Sensex companies that have reported March-quarter results so far has lagged behind analyst estimates, data compiled by Bloomberg show. Net income at about 43% of the 30 index companies missed forecasts in the three months ended December 31, compared with 40% in the previous two quarters.
Volume on the Sensex was 11% below the 30-day average yesterday. The 50-stock CNX Nifty Index on the National Stock Exchange of India fell 0.3% to 6,094.50 while its May futures settled at 6,104.05.
The Sensex rose 0.5% intraday amid optimism foreign inflows into the local shares would continue after the Bank of Japan affirmed yesterday a plan to double the monetary base over two years. Monetary easing by central banks from Europe to the US and Japan has stoked demand for riskier assets. Foreigners have bought a net $13.7bn of Indian equities in 2013, a record for the period, data compiled by Bloomberg show.
Flows have accelerated since the Reserve Bank of India cut interest rates on May 3 and helped the Sensex climb 3.3% in 2013, the most among benchmark gauges in the BRIC group. The Sensex is valued at 13.8 times projected 12-month profits, near the highest level since October. The MSCI Emerging Markets Index trades at 10.6 times.
Meanwhile, the Indian rupee dropped to its lowest level since November before Federal Reserve Chairman Ben S Bernanke’s testimony to the US Congress on the world’s largest economy.
St Louis Fed President James Bullard on Tuesday said the central bank should keep buying bonds and New York Fed President William Dudley said it had previously been overly optimistic about growth.
Sixteen of 24 emerging-market currencies tracked by Bloomberg weakened in the past month on concern US policy makers will rein in debt purchases that have spurred fund flows into emerging markets.
“The rupee can rally only after Bernanke confirms that the Fed will retain its pace of asset purchases,” said Nick Verdi, a strategist at Barclays Plc in Singapore. “The rupee is trading consistent with high-yielding peers like the South African rand and Brazil’s real on concern of reduced inflows.”
The rupee declined 0.1% to 55.4750 per dollar in Mumbai, according to data compiled by Bloomberg. It touched 55.6450 earlier, the weakest level since November 27. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, rose 20 basis points, or 0.20 percentage point, to 8.47%.
Bernanke addresses Congress less than a month before the policy-setting Federal Open Market Committee meets. The FOMC said May 1 that it will keep buying $85bn in bonds per month to bolster growth, and that it would increase or decrease the purchases in response to the labor market and inflation.
Global funds bought a net $13.7bn of Indian shares this year and foreign holdings of local debt rose to a record $38.1bn on May 20, exchange data show. Ten-year Indian sovereign bonds offer a premium of 524 basis points over similar-maturity US Treasuries.
Three-month onshore rupee forwards traded at 56.53 per dollar, compared with 56.22 on Tuesday, according to data compiled by Bloomberg. Offshore non-deliverable contracts were at 56.46 versus 56.13.