Indian stocks slid for a second day, led by power utilities and developers, amid concern the rally fuelled by capital inflows has exceeded the outlook for earnings growth.
The benchmark gauges struggled to hold on to their intraday gains after European stocks opened lower and investors exited recent outperformers. The S&P BSE India Power Index fell after rising 4% in as many sessions, while a gauge of real-estate companies ended a four-day, 9% climb. Energy shares bucked the trend following a pick-up in oil prices.
“We will continue to see sector rotation and gyrations until company earnings revive meaningfully,” Abhimanyu Sofat, vice president at brokerage India Infoline Ltd, said by phone from Mumbai. Some traders also closed positions ahead of the weekend and public holidays on Tuesday and Wednesday, he said.
Index Change Size and Scope BSE Sensex -0.4% One-week low BSE Power -1.2% Lowest since September 30 BSE Realty -1.5% Biggest drop in week
Indian equities on Friday capped a second straight quarter of gains and the rupee completed a third monthly climb as the nation’s world-beating growth lured investors. Overseas funds have bought $7.7bn of shares this year, data compiled by Bloomberg show. That’s more than double the $3.3bn they invested in all of 2015. Local mutual funds have purchased $2.2bn of shares since Jan. 1, extending last year’s record inflow of $10.2bn.
The inflows have fuelled the Sensex’s 22% rebound from a low reached in February. The index trades at 15.8 times projected 12-month earnings, down from a multiple of 16.7 times last month, which was the most expensive since January 2011. Still, operating profit for 30 companies on the gauge rose about 4% in the June quarter, compared with an 8% increase in the previous three months, data compiled by Bloomberg show.
NTPC Ltd, the nation’s largest power generator, tumbled 2.3% in the worst performance on the Sensex; Power Grid Corp lost 1.9%, falling from a one-month high. ICICI Bank Ltd declined the most in a week, while State Bank of India fell 1.4%, ending a four-day, 5.5% advance. Indian Oil Corp led state-owned refiners Hindustan Petroleum and Bharat Petroleum to new records. Reliance Industries Ltd, owner of the world’s largest refining complex, jumped to its highest price since June 2014, while GAIL India Ltd, the biggest supplier of natural gas, rallied to the highest price since February 2015.
Crude halted gains below $50 a barrel after advancing 2.3% Wednesday to the highest close in more than three months.
“Oil marketing companies have moved up because of healthy refining margins, and things will remain good for them until oil prices move up to $60 a barrel,” said Satish Mishra, an analyst at HDFC Securities Ltd.
Meanwhile, the Indian rupee weakened by 20 paise to 66.70 against a US dollar from its previous close of 66.50 to a greenback.