Indian stocks extended losses from a 19-month low, tracking declines in Asian equities, as lenders retreated after IndusInd Bank and Federal Bank reported increases in bad loans.
IndusInd tumbled to a two-month low and Federal Bank slid to its lowest price since May 2014. State Bank of India fell for a seventh day, the longest run of losses since February, while Axis Bank was the worst performer on the S&P BSE Sensex. Tata Consultancy Services, India’s top software exporter, decreased to five-week low before it kicks off the quarterly earnings season.
The Sensex slid 0.6% to the lowest close since May 2014. The gauge has retreated 5.5% in January, poised for a third monthly loss, as overseas investors sold riskier assets amid a turmoil in China’s stocks and currency. The Sensex has erased nearly all gains recorded after Prime Minister Narendra Modi’s party swept to power in May 2014, as euphoria over his economic agenda waned.
“Most foreign investors see China as all of Asia and are pulling out of emerging markets without drilling down to country or company-specific level,” Anil Ahuja, chief executive officer of IPEplus Advisors in Singapore, said in an interview with Bloomberg TV India yesterday. “Even the local Chinese money is trying to leave China, which means there’s going to be a huge demand for the US dollar. And that cannot possibly be good for India, except for some exporters.” Overseas investors sold a net $157mn of Indian stocks on January 9, taking outflows this month to $498mn after they bought local equities for four years. They’ve pulled $801mn from South Korea, $1.56bn from Taiwan and $228mn from Thailand, data compiled by Bloomberg show.
IndusInd slid 2.5% to its lowest level since November 18. Gross bad-loan ratio widened to 0.82% in the December quarter from 0.77% at end-September. Bad loan provisions rose to Rs1.77bn from Rs980mn a year ago.
Federal Bank plunged 7.7% to its lowest level since May 2014. Gross bad loans rose to 3.15% from 2.9% in end-September. State Bank of India fell 2.4%, while Axis Bank declined 2.7%.
Tata Consultancy will probably report a 10% gain in profit for the December quarter from a year ago, according to the mean of 21 analyst estimates in a Bloomberg survey. The shares slid 1.5%.
In the July-to-September period, 57% of Sensex companies reported earnings that matched or beat estimates, compared with 60% in the June quarter, data compiled by Bloomberg show.
“Big expectations of company earnings growing at 20% annually from 16% to 17% are not going to materialise, and if price-earnings contract, then that’s another headwind we are going to have to deal with,” IPEplus’s Ahuja said.
The losses have dragged down the Sensex’s 14-day relative- strength index close to the threshold of 30, which to some traders signals a security has fallen too far. The Sensex rebounded 4.5% after the RSI fell to 28.5 on December 9. Optimism may return if the government announces growth-boosting measures in its federal budget due at the end of February, Ahuja said.
The Sensex trades at 14.8 times its projected 12-month earnings, compared with a multiple of 10.4 for the MSCI Emerging Markets Index.
Meanwhile, the rupee fell 0.1% to close at 66.87 a dollar in Mumbai, according to prices from local banks compiled by Bloomberg.