Jan. 12 (Bloomberg) -- Indian stocks dropped the most in two weeks after Infosys Ltd. reduced its sales forecast for a second time and on concern a rebound in the nation’s factory output may prompt the central bank to hold interest rates.
Infosys, the nation’s second-biggest software maker, sank 8.4 percent after it pared its annual sales forecast in dollar terms because of weaker economic growth in its biggest markets including Europe even as profit beat estimates. State Bank of India Ltd., the biggest lender, and Sterlite Industries (India) Ltd., the largest copper maker, paced gains among their peers.
The BSE India Sensitive Index, or Sensex, lost 0.9 percent to 16,037.51 at the 3:30 p.m. close in Mumbai, the most since since Dec. 29. Industrial output in November rebounded from the worst month since March 2009, giving scope for the Reserve Bank of India to keep rates unchanged on Jan. 24 for a second month to fight inflation that exceeded 9 percent throughout 2011.
“There was expectation that the Reserve Bank would cut the cash reserve ratio or even interest rates; it looks like that will have to wait,” Aneesh Srivastava, who oversees $435 million as chief investment officer at the IDBI Federal Life Insurance Co., said in a phone interview. “The full impact of high interest rates, slowing domestic growth and global uncertainties on earnings would keep the pressure on markets.”
The Sensex slumped 25 percent in 2011 on concern a falling rupee and 13 increases in borrowing costs since the start of 2010 will erode company earnings. Profit forecasts for Sensex companies for the year to March have slid 8.7 percent to 1,150 rupees a share, the most since the year ended March 2009, data compiled by Bloomberg show.
Infosys sank 8.4 percent to 2,588.25 rupees, its steepest fall since April 15. Larger rival Tata Consultancy Services Ltd. lost 4.2 percent to 1,089.5 rupees. The two companies get as much as 90 percent of their sales from abroad. Wipro Ltd., the third-biggest, slid 2.5 percent to 391.45 rupees.
Infosys said sales in the year ending in March will range from $7.029 billion to $7.033 billion, compared with the $7.08 billion to $7.2 billion it predicted in October, and forecast a drop in operating profit margin for the year.
“The business environment seems to be quite challenging and that does not give too much confidence from a stock market point of view,” Manish Sonthalia, who manages $250 million in equities at Motilal Oswal Asset Management Co. in Mumbai, told Bloomberg UTV today. “The guidance being scaled down implies an absolutely flat fourth quarter” for Infosys, he said.
Net income rose 33 percent to 23.7 billion rupees ($458 million) in the December quarter, Infosys said. That compares with the 22.8 billion-rupee median of 44 analyst estimates compiled by Bloomberg.
The rupee’s 7.7 percent decline against the dollar in the December quarter would have boosted margins at India’s software exporters, Pratik Gandhi, an analyst at IDBI Capital Markets Services Ltd. in Mumbai, said.
“They beat some estimates because of forex, not because of improvements in their core business,” said Pralay Kumar Das, an analyst at Elara Securities Ltd. in Mumbai. “What the market looks at though is the future.”
India’s factory output increased 5.9 percent in November from a year earlier after a revised 4.7 percent decline in the previous month, the data showed. The median of 27 estimates in a Bloomberg News survey was for a 2.1 percent gain.
The yield on the 8.79 percent debt due November 2021 rose to 8.24 percent at 4:06 p.m. from 8.22 percent earlier. The rupee extended the day’s advance to 0.4 percent, trading at 51.69 per dollar. The S&P CNX Nifty Index on the National Stock Exchange of India lost 0.6 percent to 4,831.25. The BSE 200 Index slid 0.3 percent to 1,949.94.
State Bank added 2.2 percent to 1,764.4 rupees, extending its three-day advance to 7.8 percent. The stock had fallen 42 percent last year. Housing Development Finance Corp. rose 1 percent to 687.4 rupees. The biggest mortgage lender’s profit for the quarter ended Dec. 31 rose 10 percent to 9.81 billion rupees, near the 10.2 billion rupees estimated by analysts.
Sterlite climbed 1.3 percent to 102 rupees, extending this week’s rally to 8 percent. Hindalco Industries Ltd., an aluminum producer which was the worst performer on the Sensex last year, gained 1.8 percent to 32.7 rupees.
Foreign investors bought a net 4.98 billion rupees ($96 million) of stocks yesterday, according to the regulator. They have boosted holdings by a net 19.5 billion rupees this month, the most since October, after withdrawing a net $512 million from equities last year, the data show.
Flows reached a record $29.4 billion in 2010.
--With assistance from Santanu Chakraborty in Mumbai and Manish Modi in New Delhi. Editor: Ravil Shirodkar
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