Indian stocks fell for a second day in volatile trading as drugmakers countered advances in automakers before the expiry of the monthly derivatives series tomorrow.
Lupin slumped to a 14-month low after an analyst report said that inspectors from the US Food and Drug Administration had flagged failings at one of the drugmaker’s key factories. Rival Cipla slid to its lowest price in 19 months and Sun Pharmaceutical Industries dropped to a two- month low. Maruti Suzuki India surged the most in three weeks, while Tata Motors was the best performer on the Sensex.
The S&P BSE Sensex dropped 0.3% at the close in Mumbai after changing direction at least 10 times. The index slid the most in a month on Monday before a monetary policy review next week and the end of the monthly derivatives series tomorrow.
The gauge is still set for its best month since October 2013 as Finance Minister Arun Jaitley’s pledge to further cut the fiscal gap stoked speculation of an interest- rate reduction and spurred capital inflows.
The Reserve Bank of India will review rates on April 5.
“Markets will continue to be volatile as defensive stocks like the drugmakers are under pressure,” RK Gupta, managing director of Taurus Asset Management Co, which has $520mn, said by phone from New Delhi. “Traders are cautious before the expiry Thursday and the RBI policy next week. March-quarter results and the onset of the monsoon will play a key role for markets in the near term.”
Lupin tumbled 6.3% to 1,401.6 rupees. The company’s Mandideep unit in India was inspected by the US FDA in February, according to a note sent by IIFL to its clients and seen by Bloomberg. Shares of India’s second-biggest drugmaker by market value pared some of their losses after saying observations made by the US Food and Drug Administration on one of its key factories were “minor in nature.”
The FDA’s observations have been classified as voluntary action initiated, “which is generally benign and does not escalate into warning letter,” Morgan Stanley analysts Sameer Baisiwala and Vaibhav Dusad wrote in an investor note, citing Lupin’s management. The brokerage maintained its overweight rating on the stock with a 12-month price target of Rs2,133.
Rivals Sun Pharmaceutical Industries, Cipla and Dr. Reddy’s Laboratories were among the worst performers on the Sensex.
A gauge of 63 health-care companies tumbled 2.6%, the lowest level since January 2015, and was the biggest decliner among the 13 sectoral indexes compiled by the BSE.
Foreign inflows have picked up, buoyed by easing of volatility in the global markets and prospect of lower borrowing costs.
Foreigners have bought $2.7bn of Indian shares since March 1. The inflows helped fuel an 8% gain in the Sensex so far this month, the best performance since October 2013.
The Sensex has fallen 4.7% this year and trades at 15.2 times 12-month projected earnings. The MSCI Emerging Markets Index is valued at a multiple of 11.6.
Meanwhile the rupee yesterday ended marginally higher against the US dollar ahead of key jobs data from the US later this week. The currency closed at 66.54, up 0.05% from its previous close of 66.57. The rupee opened at 66.51 and touched a high and a low of 66.47 and 66.61, respectively.
Traders are eyeing US non-farm payroll and unemployment data on Friday. A better-than-expected number will raise the possibility of a Fed rate hike in its April policy meet.
Since the beginning of this year, the rupee has lost 0.58%, while FIIs have bought $209mn from local equity and sold $853mn in debt market.
Most Asian currencies were trading lower. Indonesian rupiah was down 0.39%, Thai baht 0.28%, Japanese yen 0.10%, Philippines peso 0.04% and Chinese renminbi 0.03%. However, the Malaysian ringgit was up 0.52% Singapore dollar 0.19% and South Korean won 0.18%.
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