Bloomberg News

India Nifty Futures Drop as Profit Concerns Prompt Funds to Sell

April 11, 2013

Indian (SENSEX) stock-index futures dropped as overseas investors extended the longest selloff of the nation’s shares in almost a year on speculation quarterly earnings may decline for the first time in three years.

SGX CNX Nifty Index futures for April delivery fell 0.1 percent to 5,590 at 10:30 a.m. in Singapore. The underlying CNX Nifty (NIFTY) Index rose 0.6 percent to 5,594 yesterday. The S&P BSE Sensex index climbed 0.6 percent to 18,542.20. The Bank of New York Mellon India ADR Index of U.S.-traded shares increased 1.1 percent to 1,118.98.

Net incomes for the 30 Sensex companies in the quarter ended March 31 may fall 0.8 percent from a year ago, according to estimates compiled by Bloomberg. That would be the first decrease in profits since a 1.8 percent drop in the three months ended June 2010, the data show. Foreign funds were net sellers of Indian stocks for a sixth day on April 9, the longest series of daily outflows since May.

“Earnings will face a double whammy from both slowing revenue growth and continued pressure on margins,” Manishi Raychaudhuri and Gautam Mehta, analysts at BNP Paribas SA, wrote in a report this week. “We expect economic headwinds to continue to weigh on earnings outlooks.”

Infosys Ltd. (INFO), the second-biggest company on the Sensex by weighting, will announce results today, marking the start of the reporting season. India’s second-largest software exporter may report net income of 23 billion rupees($422 million), compared with 23.2 billion rupees a year earlier, according to the median estimate of 36 analysts in a Bloomberg survey.

Overseas Selloff

Net income at about 43 percent of the 30 Sensex firms trailed forecasts in the three months ended Dec. 31, compared with 40 percent in the previous two quarters.

Foreign funds sold a net $113.5 million of Indian stocks on April 9, according to data from the market regulator. That’s the biggest one-day outflow since Feb. 28. Overseas investors have pared this year’s record purchases on concern that company profits will weaken as Asia’s third-largest economy, facing the fastest inflation among major emerging nations and a record current-account deficit, expanded at the weakest pace since 2003 in the year to March 31.

Industrial output shrank 1.3 percent in February, according to a survey before a report due today. That would be the biggest contraction since June. A separate report today may show consumer price growth slowed to 10.70 percent from a year earlier in March from almost 11 percent in February, according to a Bloomberg survey.

Steel Stocks

Indian steel stocks may extend losses even after the worst start to a year in eight years, as production failed to keep pace with rising capacity amid continuing imports, Credit Suisse analysts Neelkanth Mishra and Ishan Mahajan wrote in a note today.

Shares of Tata Steel Ltd. (TATA) and Steel Authority of India Ltd. (SAIL) have each slumped at least 30 percent this year, while Jindal Steel & Power Ltd. (JSP) plunged 26 percent and JSW Steel Ltd. (JSTL) declined 20 percent.

“Our analysts expect the weakest earnings performances from autos, building materials, capital goods and property sectors,” according to the BNP report.

The Sensex has dropped 4.6 percent this year and is valued at 12.5 times projected 12-month profits, compared with the MSCI Emerging Markets Index’s 10.4 times.

To contact the reporter on this story: 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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