Tata Steel and Tata Consultancy Services dragged down Indian benchmark indexes from a three-week high after the nation’s largest conglomerate abruptly ousted its chairman.
The BSE Sensex closed down 87.66 points at 28,091.42 and Nifty fell 17.65 points to close at 8,691.30. Chairman Cyrus Mistry, 48, was replaced by Ratan Tata, a 78-year-old member of the founding family and the previous chairman who will serve as the interim chief and take part in the search for a more permanent successor.
Tata asked companies to focus on being leaders in their businesses and not be concerned about the change in management, according to a statement issued yesterday.
“This has created short-term uncertainty for the Tata Group, and given its size it’s pulling down the index,” Rudramurthy BV, head of research at Vachana Investments, said by phone from Bengaluru. “This is a temporary reaction. Investors with a long-term horizon must use the declines as an opportunity to buy” into group companies that are well-run and don’t have a lot of debt, he said. He’s bullish on Tata Global Beverages, the Indian partner of Starbucks Corp, and its subsidiary Tata Coffee.
Mistry’s ouster marks the end of the push to transform Tata Group into a more prudent enterprise than the globetrotter that bought Jaguar Land Rover and steelmaker Corus Group under Ratan Tata. In recent years, the Indian conglomerate refinanced loans and sold assets to help tackle debt levels that had bloated to more than $30bn. Tata Steel in March said that it would consider selling its UK operations after years of losses.
The group, founded in 1868, employs more than 660,000 people and has 29 listed units with a combined capitalisation of more than $100bn. Tata Consultancy Services is the group’s biggest unit and India’s largest company by market value. Foreign investors sold $59mn of local shares on Monday paring this year inflows to $7.4bn of domestic shares this year, the most in Asia after Taiwan and South Korea, data compiled by Bloomberg show.
The Sensex has rallied 22% from a February low. The index is valued at 16.5 times projected 12-month earnings, compared with a five-year average of 14.4 times.
The MSCI Emerging Markets Index is valued at a multiple of 12.6.
HDFC Bank, the biggest lender by market value, fell 1.1% in a second day of declines after its bad loans provisions rose 10% from a year earlier. Net income in the September quarter climbed 21% to Rs34.6bn, matching estimates. IDBI Bank tumbled 2.9% after second-quarter profit more than halved on bad loan write offs.
Hexaware Technologies advanced 3% to its highest level since September 7 after third-quarter profit and sales met estimates. The company also approved a buyback of its shares.
Arvind soared 12%, the most since July 2014, after the company said it will raise Rs7.4bn selling a 10% stake in its brands business.
Meanwhile the rupee yesterday weakened marginally against the US dollar, tracking fall in the local equity markets. The rupee was trading at 66.88 against the US dollar, down 0.04% from its previous close of 66.85. The home currency opened at 66.93. So far this year, it fell 1.15%.
The benchmark 10-year government bond yield was trading unchanged from its Monday close of 6.76%. Bond yields and prices move in opposite directions. Most Asian currencies gained. Thai baht was up 0.22%, Taiwan dollar 0.17%, Malaysian ringgit 0.12%, Singapore dollar 0.12% and Indonesian rupiah 0.06%. However, Japanese yen was down 0.24% and South Korean won fell 0.2%.
The dollar index, which measures the US currency’s strength against major currencies, was trading at 98.727, down 0.02% from its previous close of 98.756.