Indian stocks dropped, with the benchmark gauge paring a weekly gain, as some investors sold lenders and energy companies after recent advances.
The BSE Sensex dropped 52.66 points to end at 28,077.18 and Nifty fell 6.35 points to 8,693.05.
Reliance Industries, which has a 7% weighting on the S&P BSE Sensex, was the biggest drag on the gauge. The stock dropped 2.2%, the most in a week. Axis Bank was the top loser on the Sensex, while a gauge of lenders capped its best week since July after Essar Group’s $13bn deal with a group involving Russia’s Rosneft improved prospects for loan recoveries at local banks.
Reliance, owner of the world’s largest refining complex, was among the top losers on the Sensex on Friday despite reporting second-quarter profit that beat estimates. Investors are concerned the increased spending on the company’s new telecommunications venture will be a drag on cash flows from its main oil-refining and chemicals businesses.
Reliance Jio Infocomm spent Rs13,700 crore ($2bn) to buy airwaves in the latest round of auctions this month to bolster the 4G phone services it started in September. The company added 16mn users in its first month of operations and said on Thursday it may consider extending the free services after December.
“Investors are concerned about the competitive intensity and margin pressure from the telecom business,” said G Chokkalingam, managing director at Mumbai-based Equinomics Research & Advisory. “The earnings are good and the refining business is doing fine.”
The Sensex trades at 16.4 times projected 12-month earnings, compared with a five-year average of 14.3 times. The MSCI Emerging Markets Index is valued at a multiple of 12.5.
Foreign investors sold $44mn of local shares on October 19, paring this year’s inflows to $7.4bn.
Meanwhile the rupee yesterday closed at a one-week low against the US dollar after foreign institutional investors (FIIs) continued to sell in local equities and debt markets. This was the second consecutive session when the rupee closed lower.
A fall in Asian currencies also dampened sentiment.
The rupee closed at 66.89 per US dollar – a level last seen on October 13, down 0.12% from its previous close of 66.81. The home currency opened at 66.91 and touched a low of 66.94 a dollar, a level last seen on October 13. So far this year, it has fallen 1.2%.
From October 3-19 (in the last 11 consecutive sessions), FIIs sold $1.19bn in debt, while in the last six trading sessions they sold $361.85mn in equity markets.
Most Asian currencies closed lower as the dollar climbed to a seven-month high against a basket of currencies. The greenback was boosted by a fall in the euro after the European Central Bank shot down talk that it was contemplating tapering its monetary easing.
The South Korean won was down 0.66%, Philippines peso 0.46%, Taiwanese dollar 0.43%, Chinese offshore 0.38%, Thai baht 0.34%, Chinese renminbi 0.28%, Indonesian rupiah 0.26% and Singapore dollar 0.12%. However, the Japanese yen was up 0.19% and Malaysian ringgit 0.06%.
The benchmark 10-year government bond yield closed at 6.761% compared with Thursday’s close of 6.76%. Bond yields and prices move in opposite directions.
The dollar index, which measures the US currency’s strength against major currencies, was trading at 98.532, up 0.23% from its previous close of 98.315.
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