Indian equities drop as NTPC plunges 11%

Traders work at a local brokerage in Mumbai. Indian stocks dropped yesterday, led by power utilities and capital goods companies, as the benchmark index declined from a record.

Bloomberg

Mumbai

Indian stocks dropped, led by power utilities and capital goods companies, as the benchmark index declined from a record.

NTPC, the nation’s top electricity generator, posted its steepest loss since January 2008, sending the S&P BSE India Power Index to its biggest decline in three months. Larsen & Toubro slumped the most in two months, pacing losses in the S&P BSE India Capital Goods Index, which dropped from its highest level in 10 months.

The S&P BSE Sensex fell 0.3% to 21,255.26 at the close. The measure climbed to a record on Monday after the Bharatiya Janata Party won the state elections, giving it momentum to end the ruling Congress party’s decade-long rule in polls due by May and install Narendra Modi as prime minister. Modi is credited with achieving higher growth than the national average and increasing power capacity more than fivefold in his home state of Gujarat since becoming chief minister in 2001.

“Infrastructure stocks have rallied amid the euphoria of elections but growth and earnings will take time to revive,” Gajendra Nagpal, chief executive officer at Augment Financial Services, said by phone from New Delhi. “Investors are booking profit as the market has run up ahead of fundamentals.”

NTPC plunged 11%, the biggest loser on the Sensex, after the nation’s electricity regulator proposed changes to production incentives. “The proposed regulations are negative, but the stock has over-reacted,” said Sachin Mehta, an analyst at Centrum Broking. Power Grid Corp, the nation’s biggest distributor, lost 2.9%. The S&P BSE India Power Index rose 23% from a four-year low on August 27 through yesterday, taking its 14-day relative strength index to 75, above the 70 level that signals gains in the gauge may be poised to end.

Engineering company Larsen & Toubro slid 4.1% to Rs1,100.4, the biggest drop since September 23. Turbine maker Bharat Heavy Electricals tumbled 3.5%, the biggest loss since November 7. The S&P BSE India Capital Goods Index was valued at 18.1 times estimated earnings on Monday, the highest reading since January 2011 and above its five-year average of 16.6 times, data compiled by Bloomberg show. The gauge has risen 49% from its lowest level since April 2009 reached on September 3.

The Sensex has climbed 9.4% this year, as growing exports boosted company earnings and stimulus from the Federal Reserve spurred foreign funds to pour $18.5bn in domestic shares. That’s the biggest inflow in Asia after Japan, data compiled by Bloomberg show. The Sensex is valued at 13.8 times projected 12-month earnings, compared with a multiple of 10.6 for the MSCI Emerging Markets Index, the data show.

The 50-stock CNX Nifty on the National Stock Exchange of India fell 0.5% after rising to 6,363.90 yesterday, an all-time closing high.

Rupee rally continues

India’s rupee rose for a fifth day, the longest winning streak since September, on optimism inflows will continue after poll results showed the main opposition party won most seats in regional elections.

The Bharatiya Janata Party, which Goldman Sachs Group says is perceived by investors as more business friendly, won the most seats in four of five state polls held over the past month, results showed on December 8. The rupee fell as much as 0.3% earlier yesterday on concern the US could cut stimulus as early as this month, potentially reducing inflows into emerging markets. Global funds bought a net $1bn of Indian stocks this month, exchange data show.

“The rupee will remain supported on positive domestic market sentiment following the outcome of assembly elections,” analysts at ICICI Bank wrote in a research report yesterday. No individual analysts were named.

The rupee rose 0.2% to 61.0375 per dollar in Mumbai, according to prices from local banks compiled by Bloomberg. One-month volatility, a gauge of expected moves in the exchange rate used to price options, fell 41 basis points, or 0.41 percentage point, to 11.72%. Swings in the currency will increase ahead of the Federal Open Market Committee’s Dec. 18 meeting, said Abhishek Goenka, CEO at India Forex Advisors in Mumbai.

Federal Reserve Bank of St. Louis President James Bullard said on Monday the odds of paring the central bank’s bond buying have risen after data last week showed US employers added more workers than economists estimated.

Three-month offshore non-deliverable rupee forwards fell 0.1% to 62.36 per dollar, according to data compiled by Bloomberg. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.