Bloomberg News

India’s Nifty Stock Futures Drop on Earnings Concerns

July 10, 2012

India’s Nifty (NIFTY) stock-index futures dropped on concern corporate earnings may weaken amid slowing economic growth.

SGX S&P CNX Nifty Index futures for July delivery fell 0.6 percent to 5,324 at 9:55 a.m. in Singapore. The underlying S&P CNX Nifty Index on the National Stock Exchange of India Ltd. climbed 1.3 percent to 5,345.35 yesterday. The BSE India Sensitive Index (SENSEX), or Sensex, gained 1.3 percent to 17,618.35, its highest close since March 15.

Tata Consultancy Services Ltd. (TCS) and Infosys Ltd. (INFO), India’s two biggest software exporters, release quarterly results tomorrow, marking a start to the earnings season for the three months ended June 30. Infosys’s dollar revenues may decline from the previous quarter, and sales-growth guidance for this fiscal year may be cut by 2 percentage points, according to a JPMorgan Chase & Co. note dated yesterday.

“Quarterly results are unlikely to be very good,” Suresh Mahadevan, managing director at UBS Securities India Pvt., said in an interview with Bloomberg UTV yesterday. “I am still not optimistic because the macro is very poor. The risk is to the downside and markets could correct 10 percent to 15 percent.”

Housing Development Finance Corp. (HDFC), India’s biggest mortgage lender, will today be the first Sensex company to report quarterly earnings. The company may post a net income of 10.1 billion rupees ($182 million), compared with 8.45 billion rupees a year earlier, according to a median of 12 analyst estimates compiled by Bloomberg.

‘Tepid’ Growth

Profits at the 30 Sensex companies may drop 14 percent to 1,280 rupees per share in the year ending March 2013, the most in three years, estimates compiled by Bloomberg show. Earnings for 30 percent of the companies in the index missed estimates in the March quarter, compared with 47 percent in the period ended December, the data show.

Still, “we expect decent revenue growth, and growth rates, while tepid, should show slight improvements compared with the past few quarters,” Manishi Raychaudhuri and Gautam Mehta, analysts at BNP Paribas Securities (Asia) Ltd., wrote in a report today. “While it is still early days, if deficient monsoons drive down rural consumption -- one of the very few growth drivers for India -- the market could see a correction.”

India’s monsoon, which accounts for more than 70 percent of annual rainfall, was 23 percent below a 50-year average since June 1, the nation’s weather bureau said yesterday. The monsoon may cover the entire nation by today, four days earlier than normal, the bureau said.

Farm Output

Prime Minister Manmohan Singh is counting on growth in farm output, which accounts for about 15 percent of India’s gross domestic product, to curb inflation that the central bank deemed too high last month to cut interest rates.

Singh is under pressure to support an economy expanding at the weakest pace in nearly a decade as policy gridlock deters investment and Europe’s debt crisis hampers exports. The economy grew 5.3 percent in the quarter ended March, the least since 2003.

The Sensex has gained 14 percent this year and trades at 13.8 times estimated earnings, compared with the MSCI Emerging Markets Index’s 10.1 times.

Overseas investors bought a net $59.9 million of Indian stocks on July 9, taking their investment this year to $9.6 billion, according to the Securities & Exchange Board of India, the market regulator. That’s a record for the period, according to data compiled by Bloomberg.

Shares of Reliance Industries Ltd. (RIL), owner of the world’s largest oil-refining complex, may move after the company hired banks to help arrange $1.5 billion of loans, according to three people familiar with the matter.

Steel Authority of India Ltd. may be active after the steel ministry said the nation’s second-biggest producer and Japan’s Kobe Steel plan to set up a 500,000 metric-ton-per-annum iron- nugget plant in West Bengal state.

To contact the reporter on this story: Shikhar Balwani in Mumbai at sbalwani@bloomberg.net

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


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