Bloomberg/Mumbai

Indian stocks dropped as some investors judged the rally in the benchmark index to a six-week high had become excessive before the start of quarterly earnings season next week.
Reliance Industries, owner of the world’s largest refining complex, fell the most on the S&P BSE Sensex after a report that the company may face a Rs120bn ($1.8bn) penalty from the government. GAIL India fell for the first time this week. ITC, the biggest tobacco company, slid the most in five weeks. Lupin, a drugmaker, dropped for a fourth day after climbing to an all-time high last week. ICICI Bank declined the most in a week.
The S&P BSE Sensex fell 0.7% to 26,845.81 at the close in Mumbai yesterday. The gauge had rallied 5.5% from September 29 through Wednesday after the Reserve Bank of India cut its benchmark interest rate by more than economists’ forecast. Its seven-day relative strength index climbed above 70 on Tuesday. Some investors see a level above this reading as a signal to sell.
“The pause is just a technical halt,” RK Gupta, managing director of Taurus Asset Management Co, which has $640mn in assets, said by phone from New Delhi. “The market direction will depend on how the earnings season pans out.” Profits for the 30 Sensex companies climbed 1% in the June quarter, following a 41% drop in the prior three months, data compiled by Bloomberg show. While analysts have reduced the estimates for fiscal 2016 profits by 13% since the start of April, they predict profits will grow 2.2% in the July-September period and 11% in the December quarter, the data show.
Reliance lost 2.7%, the most since September 22. The company may have extracted 12 to 18bn cubic metres of gas from block belonging to state-run explorer Oil & Natural Gas Corp in KG basin, ET Now television channel reported, citing oil ministry officials it didn’t identify. ONGC was little changed. GAIL India lost 2.4%, ending three days of advance. ITC fell 2.4%, the most since September 1. Lupin slid 1%. ICICI Bank decreased the most since September 24. International investors were net buyers of Indian stocks for a fourth consecutive day on October 6, the longest stretch of inflows since August. Foreigners have bought $3.8bn of the nation’s shares this year, the most among eight Asian markets tracked by Bloomberg. The Sensex has fallen 2.4% this year and trades at 15.6 times projected 12-month earnings, compared with the MSCI Emerging Markets Index’s multiple of 11.2.
Meanwhile, the rupee weakened as the International Monetary Fund warned of growing emerging-market risks amid the possibility of an increase in US interest rates. The currency retreated 0.2% to 65.1250 a dollar, poised for its biggest drop in two weeks, prices from local banks compiled by Bloomberg show. It jumped 1.4% in September in Asia’s best performance.