India’s benchmark stock index fell, erasing a weekly advance, amid concern the recent rally has made equity valuations expensive.
The BSE India Sensitive Index (SENSEX), or Sensex, lost 0.7 percent at 18,667.72, according to preliminary closing prices. About four shares slid for each that gained on the 30-stock gauge. The S&P CNX Nifty Index (NIFTY) of 50 companies dropped 0.7 percent to 5,679.20. Tata Consultancy Services Ltd. (TCS) retreated 1.3 percent before its earnings report. Hindustan Unilever Ltd. (HUVR), the biggest home-products maker, fell the most in a month. ITC Ltd. (ITC) climbed to a record after reporting profit that beats estimates.
The Sensex has surged 21 percent this year as foreigners bought $18 billion of domestic shares, the most among 10 Asian markets tracked by Bloomberg, excluding China. The inflows have come even as the fastest inflation among BRIC countries curbed policy makers’ scope to boost an economy that the International Monetary Fund forecast may grow at the slowest pace in a decade this year. The Sensex trades at 14.8 times estimated earnings, compared with 12.6 times at the end of May. The MSCI Emerging Markets Index (MXEF)’s trades at 11.6 times.
“Company earnings have been reasonably satisfactory so far but valuations are not all that cheap,” Gajendra Nagpal, chief executive officer at Unicon Financial Intermediaries Pvt., said by phone from New Delhi. “The 5,700-5,800 level on the Nifty will be difficult to surmount unless we see a gush of flows. There may not be a significant downside, although there may be some correction.”
One out of the four Sensex companies that have reported profits so far for the September quarter have missed analyst estimates. Earnings for 40 percent of the 30 companies in the gauge trailed forecasts in the June quarter, compared with 30 percent in the three months ended March and 47 percent three months earlier, according to data compiled by Bloomberg.
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