Bloomberg/Mumbai
India’s benchmark stock index fell for a fifth day, capping the longest run of losses since June, as quarterly results from some of the nation’s biggest companies missed estimates.
ITC, the largest tobacco company, tumbled the most in five months after its profit trailed forecasts.Larsen & Toubro retreated for a ninth day after the nation’s most valuable engineering firm cut its outlook on revenue and orders. Mahindra & Mahindra, the country’s biggest tractor maker, decreased to a six-week low.
The S&P BSE Sensex tumbled 0.7% to 26,656.83 at the close, ending a four-week rally. While 72% of the companies in the gauge that have reported results for the September quarter have matched or exceeded estimates, versus 60% in June, the gauge’s earnings have so far risen just 0.3%, data compiled by Bloomberg show.
“A pick up in earnings is needed for the market to sustain,” Jagannadham Thunuguntla, head of fundamental research at Karvy Stock Broking, said by phone. “Earnings are meeting expectations at best. A real breakthrough is needed.” He favors shares of mid-cap health-care companies, automakers and home builders.
The Sensex has risen 1.9% in October, rebounding after its biggest quarterly drop in about four years. Global funds bought 907mn of local stocks this month, after pulling $2.6bn in the September quarter, amid signals the Fed will delay raising borrowing costs until 2016.
Those gains may evaporate if inflows reverse after the US central bank closes an unprecedented era of near-zero rates in December.
Investors are also awaiting the results of the state election, due on November 8, in Bihar. The polls are important for Prime Minister Narendra Modi’s efforts to control the upper house of parliament, where opposition lawmakers have blocked key economic proposals including a nationwide sales tax. A win would give him momentum in about a dozen more state elections through 2017 that will determine control of the body.
ITC tumbled 4.4%, the most since June 3. The company’s second-quarter earnings of Rs24.3bn missed the Rs26bn estimate in a Bloomberg survey. Sales of Rs88bn was lower than the Rs93.5bn forecast.
Larsen & Toubro slumped 4.1% to its lowest close since May 2014. The company cut its order inflow guidance from 15% to 5 to 7% for the year ending on March 31, Ravi Shenoy, assistant vice-president for midcaps research at Motilal Oswal Securities, said in a note today.
The brokerage plans to cut its earnings and target price “given the disappointing results,” he wrote.
Mahindra plunged 3.6%, the most since September 2. Bharat Heavy Electricals, the nation’s biggest power- equipment maker, lost 2.2% in a fourth day of declines.
ICICI Bank’s second-quarter profit rose 12% to a record as the largest private lender by assets extended more loans. Net income climbed to a record Rs30.3bn ($470mn) for the September quarter, up from Rs27.1bn a year earlier. The shares rallied 2%.
Global funds bought a net $82.1mn of Indian stocks on October 29, taking this year’s purchases to $4.6bn.
The Sensex has fallen 3.1% this year and trades at 15.5 times projected 12-month earnings. The MSCI Emerging Markets Index is valued at a multiple of 11.2.
Meanwhile the rupee retreated 0.7%, the most in five weeks, to 65.2650 a dollar, prices from local banks compiled by Bloomberg show. It rose 0.1% yesterday, taking its gain for October to 0.5% following a 1.4% rally in September.
Indian sovereign bonds completed their biggest weekly loss since June and the rupee weakened as foreigners cut holdings of the nation’s debt amid rising odds of an interest-rate increase by the Federal Reserve this year.
The yield on government notes due May 2025 rose six basis points from October 23, the most since the week ended June 26, to 7.64% in Mumbai, according to prices from the central bank’s trading system. It rose one basis point yesterday.
“Foreigners are preferring to go light given the fears of a Fed hike later this year,” said R K Gurumurthy, Mumbai-based treasurer at Lakshmi Vilas Bank.
