Bloomberg News

Indian Stocks Swing Between Gains, Losses; Reliance Climbs

November 02, 2011

Nov. 2 (Bloomberg) -- Indian stocks swung between gains and losses as concern that a Greek referendum will threaten Europe’s rescue plan outweighed speculation consumer demand in the Asian nation will weather the global economic turmoil.

Hero MotoCorp Ltd., which produces almost half of all the motorbikes sold in India, slid to a one-week low. Reliance Industries Ltd., the nation’s biggest company, advanced 1.3 percent to 871.8 rupees.

The BSE India Sensitive Index, or Sensex, lost 0.1 percent to 17,464.85 at the 3.30 p.m. close in Mumbai, after swinging between gains and losses at least 15 times. The S&P CNX Nifty Index on the National Stock Exchange of India rose less than 0.1 percent to 5,258.45.

The Greek referendum will hinder the next installment of aid funds by the International Monetary Fund and the European Union, Dutch Finance Minister Jan Kees de Jager said, throwing into doubt the nation’s ability to access the emergency funding keeping its finances afloat.

“Greece’s announcement on the confidence vote have again put things under a question mark,” said Jyotivardhan Jaipuria, head of India research at Bank of America Merrill Lynch, said in an interview with Bloomberg UTV today. “Everything’s on an edge over there and any wrong move can blow up quite a bit. It will continue to occupy investor attention.”

India’s Prime Minister Manmohan Singh said Europe’s debt crisis has emerged as the “principal source of concern” for the global economy and much more needs to be done to restore confidence in markets.

The Sensex has slumped 15 percent this year on concern the Reserve Bank of India’s record increases in borrowing costs may combine with Europe’s debt crisis and slowing U.S. economic growth to erode corporate profits. Companies in the gauge trade at 14.9 times estimated profits, down from 21.5 times in March 2010. The MSCI Emerging Markets Index is valued at 10.4 times.

‘Not Expensive’

Still, a gauge of India’s manufacturing output climbed to 52 in October from 50.4 in September, HSBC Holdings Plc and Markit Economics said yesterday, a sign Asia’s third-largest economy is withstanding record borrowing costs. Five of 16, or 31 percent, of Sensex companies that posted earnings for the September quarter trailed analyst estimates, compared with 47 percent in the June quarter, data compiled by Bloomberg show.

“We’re not seeing a significant slowdown in the domestic economy despite the global economic turmoil,” Sandesh Kirkire, chief executive officer at Kotak Mahindra Asset Management Co., which manages 324 billion rupees, told Bloomberg UTV today. “Domestic consumption is holding well despite the increase in interest rates. We are trading at between 13 to 15 times 2013 earnings, which in my view is not very expensive.”

Weak Rupee

The Reserve Bank last week signaled it’s nearing the end of monetary tightening after it raised rates for the 13th time since mid-March 2010, seeking to support expansion as Europe’s debt crisis clouds the outlook for exports.

Inflation is being stoked by higher food and fuel costs and a weak rupee, which has fallen 9.1 percent since January and is the worst-performing currency in Asia this year. The central bank said last week that monetary tightening will help slow inflation to 7 percent by the end of March.

Bajaj Auto Ltd., India’s second-largest motorcycle maker, gained the most in a week after sales increased 7 percent in October. The stock climbed 0.3 percent to 1,718.6 rupees, the most since Oct. 26. Mahindra & Mahindra added 0.8 percent to 840.55 rupees. The stock reached a record on Oct. 28. Hero MotoCorp fell 2.3 percent to 2089.35 rupees after it forecast net sales will rise 27 percent as growth in rural areas drives demand in the world’s second biggest two-wheeler market.

Ambani Brothers

Reliance Industries surged 1.3 percent to 871.8 rupees. The company controlled by billionaire Mukesh Ambani may use towers and fiber optic cables of the company controlled by his brother Anil to expand into telecom business, Economic Times reported, citing people familiar with the situation.

Tushar Pania, spokesman for Reliance and Rohit Khanna, a spokesman for Reliance Communications Ltd. in Mumbai, declined to comment. Reliance Communications, the mobile-phone operator controlled by Anil, rose 3.3 percent to 80.05 rupees.

State Bank of India, the country’s largest lender, added 0.4 percent to 1,909.4 rupees after the government said it will invest more than 30 billion rupees in the company to help it boost capital after Moody’s Investors Service cut the rating on its financial strength, citing deteriorating asset quality.

Overseas investors bought a net 4.81 billion rupees of Indian equities on Oct. 31, raising total investment in stocks this year to 18.7 billion rupees, according to data on the website of the market regulator. They withdrew a net $2.4 billion in August, the most since October 2008.

--Editor: Ravil Shirodkar

To contact the reporters on this story: Santanu Chakraborty in Mumbai at schakrabor11@bloomberg.net; Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net


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