Indian stocks declined yesterday led by energy and healthcare companies amid concern the rally fuelled by capital inflows has outpaced the outlook for earnings growth.
Lupin plunged for a second day after it was downgraded by CLSA Asia-Pacific Markets. Indian Oil Corp lead state-owned refiners lower after reaching life-time highs earlier this week. Indian Overseas Bank retreated the most in six weeks after its bad loans widened. Motherson Sumi Systems slumped 6.5% after its earnings report.
The Sensex tumbled 1.1% at the close, the steepest loss in more than a month.
The gauge has struggled after reaching a one-year high last week amid the highest valuations in 15 months and an uneven recovery in corporate profitability. Ten of the 20 companies on the index that have reported June-quarter results so far have disappointed investors.
“The results season has been mixed and the broader triggers for the market are over,” Jagannadham Thunuguntla, head of research at Karvy Stock Broking, said by phone from Hyderabad.
Foreigners have bought a net $5.2bn of local shares this year, the most after Taiwan and South Korea, as flows to emerging markets accelerated amid a wave of global policy easing triggered by the UK’s vote in June to exit the European Union. Global funds have been net buyers of local shares every month since March.
The inflows have helped the Sensex rebound 21% from a bear-market low reached in February.
The measure’s 12-month estimated price-earnings ratio reached 16.5 times at the end of July, the highest since April 2015, compared with a multiple of 12.5 for an index of emerging markets.
Lupin tumbled 3.9% to Rs1,544.40, extending Tuesday’s 5.1% fall. CLSA lowered its recommendation on the stock to sell from underperform, and slashed its price target to Rs1,500 from Rs1,740.
“We believe Lupin may have seen its best quarter for some time,” analysts Alok Dalal and Alok Srivastava wrote in a report. Indian Oil plunged 4.7%, the most in a year.
Bharat Petroleum Corp slid 2% and while Hindustan Petroleum Corp lost 3.8%. Indian Overseas Bank tumbled 2.9% in a third day of decline.
Motherson Sumi plunged 6.5%, the most since June 24. June-quarter group profit rose 16% to Rs4.4bn from a year ago. Standalone net income dropped 10% to Rs1.44bn. EBITDA margin at unit Samvardhana Motherson Automotive Systems Group narrowed to 7.1% from 8% three months ago.
“Quarter-on-quarter margin decline at Samvardhana Motherson Automotive Systems and year-on-year net income decline in standalone operations are main reasons for the stock fall,” Pramod Amthe, an analyst at CIMB Securities India, said in a phone interview.
Reliance Industries, owner of the world’s largest refining complex, slid 2.6%, its first decline in four days.
Meanwhile the rupee closed at two-month high against the US dollar, while the 10-year bond yield closed at seven-year low, as the foreign institutional investors continued to buy in local equity and debt markets.
The home currency closed at 66.72 a dollar—a level last seen on June 8, up 0.19% from its previous close of 66.84. The rupee opened at 66.68 a dollar and touched a high of 66.67, a level last seen on June 9.
The 10-year bond yield closed at 7.101%, a level last seen on September 24, 2009 from its previous close of 7.124%. It opened at 7.125% and touched a low of 7.083%.
Since July 1 till date, foreign institutional investors (FIIs) bought $2.25bn in equity and $960.05mn in debt.
Year to date the rupee is down 0.84%, while FIIs have bought $5.21bn in equity market and sold $964.30mn in debt markets.
The Reserve Bank of India (RBI) left its key policy rate unchanged on Tuesday taking cognisance of the recent rise in inflation which puts the Consumer Price Index uncomfortably close to the upper tolerance threshold of 6% as mandated by the government. The cash reserve ratio was also kept unchanged at 4%.
Asian currencies advance across the board, led by Korean won and Malaysian ringgit, as greenback retreats and Treasury yields drop amid renewed doubts over near-term rate hikes from the Fed.
South Korean won was up 1%, Malaysian ringgit 1%, Taiwan dollar 0.97%, Japanese yen 0.66%, China offshore spot 0.45%, Thai baht 0.44%, Singapore dollar 0.41%, China renminbi 0.36%, Philippines peso 0.33% and Indonesian rupiah 0.11%.