Indian stocks retreated the most in a month, led by lenders and automaker, as some investors judged the benchmark index’s advance to an 18-month high was overdone.
The BSE Sensex closed down 248.03 points at 28,797.25 and Nifty fell 85.80 points to settle at 8,866.70 yesterday.
Yes Bank tumbled to a one-month low after the lender deferred its $1bn institutional share-sale plan. The stock capped a three-day, 11% decline after reaching a record on Tuesday. Tata Motors dropped the most in a month after rising 12% in the past month. Hero MotoCorp and Bajaj Auto slid from all-time highs. Consumer companies ITC and Hindustan Unilever dropped at least 2.3%.
India stocks have rebounded 25% from their February lows, sending the benchmark indexes to near record highs, as a wave of global policy easing and the forecast of above-normal rain after a two-year drought lured foreign flows. The Sensex’s price-to-earnings ratio on Thursday climbed to 16.7 times projected 12-month earnings, the most expensive since January 2011. The MSCI Emerging Markets Index trades at a multiple of 12.
Global funds bought $360mn of shares this week, extending the year’s inflow to $6.5bn, data compiled by Bloomberg show. The purchases are the highest in Asia after Taiwan and South Korea.
“The market paused for breath after a long rally,” Sanjiv Bhasin, executive vice president for markets at Mumbai-based brokerage India Infoline, said by phone. “A decline could get exaggerated as even conventional defensive sectors, like software, are looking bearish. Investors haven’t adequately hedged their long positions in lenders and consumer stocks.”
A slowing industry growth, a transition into digital services and the uncertainty following Brexit has soured the sentiment for software makers. The S&P BSE IT Index is near a 14-month low, while the Sensex is 3% away from its January 2015 life-time high.
Tata Consultancy Services tumbled the most in about two years on Thursday after saying that some of its US clients are holding back discretionary spending.
Meantime, foreign investors’ open interest, or number of contracts outstanding in value terms, rose to Rs1.797tn on Thursday, approaching the record Rs1.88tn reached in September 2015. Nifty 9,000 calls slumped 37% yesterday, signalling the market “faces a psychological resistance at 9,000 level,” said Devendra Chaturvedi, a Mumbai-based independent market analyst.
The NSE Nifty 50 Index fell 1% to 8,866.7 at the close, after coming within 0.5% of its March 2015 record high of 8,996.25 on Thursday.
Meanwhile the rupee yesterday closed at a one-week low against the US dollar after local equity markets fell over 248 points. A fall in the Asian currencies markets also dampened sentiments.
The home currency closed at 66.68 per dollar—a level last seen on  September 2—down 0.38%, its steepest fall since July 25, from its previous close of 66.42. The rupee opened at 66.56 per dollar and touched a low of 66.65 respectively.
Asian EM currencies weakened along with stock markets after North Korea said it conducted a nuclear test. The Philippines peso down 0.79%, Taiwan dollar 0.79%, Malaysian ringgit 0.77%, South Korean won 0.52%, Indonesian rupiah 0.34%, Singapore dollar 0.23%, China renminbi 0.21%, China offshore 0.17% and Japanese yen 0.15%.
The yield on the 6.97% 2026 bond, which is the new 10-year debt, is down to 6.833% from its previous close of 6.809%. Bond yields and prices move in opposite directions.
The rupee is down 0.78% till date this year, while foreign institutional investors have bought $6.43bn in equity and sold $674.10mn in debt markets.
The dollar index, which measures the US currency’s strength against major currencies, was trading at 94.988, down 0.04% from its previous close of 95.027.
European Central Bank president Mario Draghi, speaking after the bank kept its policy on hold as expected, said the bank was looking at options to enable it to pursue the money-printing programme, but maintained the March-end date for the plan.