Most Indian stocks fell, led by raw- materials producers, after an unexpected contraction in September industrial output fueled concern an economic slowdown will hurt corporate earnings.
About three stocks fell for every two that rose in the BSE India Sensitive Index (SENSEX), or Sensex, which was little changed at 18,671.09, according to preliminary closing prices in Mumbai. Tata Steel Ltd. (TATA) dropped to a two-month low after reporting an unexpected second-quarter loss. ITC Ltd. (ITC), the biggest cigarette company, fell 1.4 percent, the biggest drag on the Sensex. United Spirits surged by a record after Diageo Plc agreed to buy a controlling stake for $2.04 billion.
The Sensex had risen 0.4 percent before data showed India’s factory output dropped 0.4 percent in September from a year earlier, compared with the median 2.8 percent increase in a Bloomberg News survey of economists. Earnings at 12 of the 30 Sensex companies trailed analysts’ estimates for the three months to Sept. 30, same as for the June quarter, data compiled by Bloomberg show.
“There’s a knee-jerk reaction to the factory numbers,” Alex Mathews, head of research at Geojit BNP Paribas Financial Services Ltd., said in a phone interview from Kochi, South India. “The outlook remains cautious in the short term because the last few quarterly numbers have not been up to the mark. Companies are facing problems due to the slowdown.”
India needs to take more steps to revive its economy and must correct its weaknesses, Prime Minister Manmohan Singh said in Mumbai on Nov. 10.
The Sensex has rallied 21 percent this year, driven by overseas investors’ stock purchases and government policy reforms announced since mid-September to revive economic growth. The gauge trades at 14.9 times estimated earnings, compared with a multiple of 11.3 times for the MSCI Emerging Markets Index (MXEF), data compiled by Bloomberg show.
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