Oct. 31 (Bloomberg) -- Indian stocks dropped for the first time in five days, trimming a monthly advance, after Prime Minister Manmohan Singh said the country’s challenge is to sustain economic growth while keeping inflation in check.
Tata Motors Ltd., the nation’s biggest truckmaker and owner of Jaguar Land Rover, dropped the most in almost four weeks. Reliance Industries Ltd., the most valuable company, lost 2.5 percent. Hindalco Industries Ltd., the aluminum maker that controls Atlanta-based Novelis Inc., shed 4.5 percent.
The BSE India Sensitive Index, or Sensex, fell 0.6 percent to 17,705.01 at the 3:30 p.m. close in Mumbai. The S&P CNX Nifty Index on National Stock Exchange of India lost 0.6 percent and its November futures settled at 5,346.85. The BSE 200 Index retreated 0.4 percent to 2,155.58.
“Our negative view on the Indian market is largely predicated by what’s happening in India,” Neelkanth Mishra, director of India equity research at Credit Suisse Group AG, said in an interview with Bloomberg UTV today. “The problems of inflation, a high fiscal deficit and growth slowing down still continue and would cap upside in the markets. As an investor, I would use these spikes in the markets to take profits and step out of sectors I don’t want to be in.”
The Sensex surged 6.1 percent last week as Europe’s leaders agreed to expand a bailout fund to stem the region’s debt crisis. The global economic environment isn’t encouraging, Singh said in a speech in New Delhi yesterday.
Stocks also rose last week as the nation’s central bank signaled it’s nearing the end of a record cycle of interest-rate increases. The Sensex has gained 7.6 percent this month, its steepest monthly advance since March and ending three months of losses. Companies in the gauge are valued at 15.1 times estimated profits, down from 21.5 times in March 2010. The MSCI Emerging Markets Index trades at 10.5 times.
The Sensex has declined 14 percent this year amid concern measures to curb inflation may compound the effects of Europe’s debt crisis and slowing U.S. economic growth on corporate profits. The benchmark wholesale-price inflation was 9.72 percent in September, staying above 9 percent for a 10th month.
Chances that the Reserve Bank of India will increase borrowing costs at the next review on Dec. 16 are “relatively low,” it said on Oct. 25, after it raised the repurchase rate to 8.5 percent from 8.25 percent.
Signs have emerged that higher interest rates are curbing demand. Manufacturing in India in September grew at the slowest pace in 2 1/2 years, according to a Purchasing Managers’ Index released by HSBC Holdings Plc and Markit Economics on Oct. 3. India’s automakers Oct. 10 cut their car sales growth forecast for a second time this year.
Tata Motors plunged 4 percent to 198.45 rupees, its steepest drop since Oct. 4. Still, the maker of the world’s cheapest car, the Nano, is the best performer this month on the 30-member Sensex with a 27 percent surge.
Hindalco declined 4.5 percent to 135.95 rupees, halting a four-day 17 percent rally. Sterlite Industries (India) Ltd., the biggest copper and zinc producer, dropped 3.4 percent to 127.35 rupees, ending a four-day 16 percent gain.
Reliance Industries, owner of the world’s largest refining complex, fell 2.5 percent to 877.55 rupees, extending this year’s slide to 17 percent. Oil & Natural Gas Corp., the largest state-owned oil explorer, declined 2.5 percent to 277.65 rupees.
Hindustan Unilever Ltd., the Indian unit of Unilever Plc., jumped 7.1 percent to 375.8 rupees, a record, after reporting profit that exceeded analysts’ estimates for a third straight quarter. Net income increased 22 percent to 6.89 billion rupees ($142 million) for the three months ended September 30, from 5.66 billion rupees a year earlier. That beat the 5.81 billion- rupee median of 25 analyst estimates compiled by Bloomberg. The share’s 20 percent rally this year makes it the second-best performer on the Sensex after ITC Ltd., which fell 1.1. percent today to 213.15 rupees.
Five out of 16 Sensex companies reported earnings that fell short of analysts’ estimates in the quarter to Sept. 30, compared with 47 percent in the three months ended June, according to data compiled by Bloomberg.
Overseas investors bought a net 4.55 billion rupees of Indian stocks on Oct. 25 and 26, paring their outflow from equities this year to 9.75 billion rupees, data on the website of the regulator show.
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