By Santanu Chakraborty and Rajhkumar K Shaaw
Indian stocks dropped for the first time this week on concern measures taken by the central bank to curb price increases have started to cool demand and hurt corporate earnings.
Coal India Ltd. (COAL), the world’s biggest producer, fell the most in six weeks. The Reserve Bank of India is watching for signs of any slowdown in demand as it seeks to tame “inflation drivers” that are “very much in play,” Deputy Governor Subir Gokarn said yesterday. Tata Consultancy Services Ltd. (TCS), the largest software services exporter, led a decline among peers.
“There’s further downside to the Sensex earnings-per-share target,” Rakesh Arora, head of research at Macquarie Capital Securities (India) Pvt., said in an interview with Bloomberg UTV. Arora expects companies on the measure to report earnings of 1,160 rupees to 1,170 rupees a share in the year to March 31, compared with a previous estimate of 1,200 rupees. He correctly predicted in July that the gauge would decline 10 percent.
The Bombay Stock Exchange Sensitive Index, or Sensex, lost 213.49 points, or 1.3 percent, to 16,284.98 at the 3:30 p.m. close in Mumbai. The S&P CNX Nifty Index on the National Stock Exchange declined 1.2 percent to 4,888.90 and its August futures settled at 4,869.30. The BSE-200 Index fell 1.1 percent.
India’s central bank policy makers expect the country’s growth to slow to 8 percent in the year to March 31, from an estimated 8.5 percent in the previous 12 months, as inflation erodes spending power and 11 rate increases since March 2010 hurt corporate profits. The nation’s economy has grown at an average pace of 8.6 percent since 2006, compared with China’s 9.8 percent during the period, data compiled by Bloomberg show.
CLSA Asia-Pacific Markets lowered its target on the Sensex to 18,200 from 19,500, according to a note today.
“While the sharp correction in the market may suggest attractive valuations, we note that the pace of corporate earnings downgrades has intensified in the recent results season,” CLSA analysts led by Mahesh Nandurkar wrote.
Earnings for 46 percent of Sensex companies missed analyst estimates in the quarter ended June 30, according to Bloomberg data. That compares with 33 percent that lagged forecasts in the previous quarter.
Reserve Bank Governor Duvvuri Subbarao said Aug. 12 that it’s “too early to say” whether India’s policy stance to raise borrowing costs will be changed. The central bank meets on Sept. 16 to review policy.
Benchmark wholesale-price inflation in July climbed 9.22 percent from a year earlier after a 9.44 percent jump in June.
Tata Consultancy slid 1.9 percent to 962.6 rupees and larger rival Infosys Ltd. fell 1.1 percent to 2,250.9 rupees. Wipro Ltd. (WPRO), the third-biggest software services provider, shed 0.9 percent to 329.85 rupees. India’s largest software exporters get at least 80 percent of their sales from abroad.
Tata Motors Ltd. (TTMT), the biggest truckmaker and owner of Jaguar Land Rover, fell 3.7 percent to 700.75 rupees. The stock has dropped 46 percent this year and is the worst performer on the 30-member Sensex. Morgan Stanley yesterday cut its earnings estimate for the year through March 2012 by 30 percent, citing a “deteriorating global macro environment.”
State Bank of India (SBIN), the nation’s biggest lender, plunged 3.6 percent to 1,989.75 rupees and its nearest rival ICICI Bank Ltd. (ICICIBC) shed 1.2 percent to 842.2 rupees. Axis Bank Ltd. (AXSB), the fourth-largest lender by market value, dropped 3.1 percent to 1,049.7 rupees. Indian banks need “substantial capital” to support the nation’s economic growth, central bank’s Sinha said.
A drop in regional equities also contributed to today’s fall. The MSCI Asia Pacific Index sank 1.2 percent as investors weighed what the Federal Reserve will do to bolster the economy.
Fed Chairman Ben S. Bernanke and other central bankers meet this week in Jackson Hole, Wyoming, amid signs of a slowing U.S. recovery. Data today showed German business confidence fell to its lowest in more than a year, while a report may show U.S. business-equipment demand declined. Moody’s Investors Service cut Japan’s credit rating by one step, saying “weak” prospects for growth will make it difficult to tackle public debt.
Foreign investors have sold $1.8 billion of equities this month, set for the worst monthly outflow since May 2010, as higher borrowing costs weighed on company earnings and the government curbed its decision making amid corruption scandals.
Overseas investors sold a net 7.66 billion rupees ($167 million) of Indian equities on Aug. 22, paring their investment in stocks this year to 18 billion rupees, according to data on the website of the Securities and Exchange Board of India.
To contact the reporters on this story: Santanu Chakraborty in Mumbai at schakrabor11@bloomberg.net; Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net
To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net
Indian stocks dropped for the first time this week on concern measures taken by the central bank to curb price increases have started to cool demand and hurt corporate earnings.
Coal India Ltd. (COAL), the world’s biggest producer, fell the most in six weeks. The Reserve Bank of India is watching for signs of any slowdown in demand as it seeks to tame “inflation drivers” that are “very much in play,” Deputy Governor Subir Gokarn said yesterday. Tata Consultancy Services Ltd. (TCS), the largest software services exporter, led a decline among peers.
“There’s further downside to the Sensex earnings-per-share target,” Rakesh Arora, head of research at Macquarie Capital Securities (India) Pvt., said in an interview with Bloomberg UTV. Arora expects companies on the measure to report earnings of 1,160 rupees to 1,170 rupees a share in the year to March 31, compared with a previous estimate of 1,200 rupees. He correctly predicted in July that the gauge would decline 10 percent.
The Bombay Stock Exchange Sensitive Index, or Sensex, lost 213.49 points, or 1.3 percent, to 16,284.98 at the 3:30 p.m. close in Mumbai. The S&P CNX Nifty Index on the National Stock Exchange declined 1.2 percent to 4,888.90 and its August futures settled at 4,869.30. The BSE-200 Index fell 1.1 percent.
India’s central bank policy makers expect the country’s growth to slow to 8 percent in the year to March 31, from an estimated 8.5 percent in the previous 12 months, as inflation erodes spending power and 11 rate increases since March 2010 hurt corporate profits. The nation’s economy has grown at an average pace of 8.6 percent since 2006, compared with China’s 9.8 percent during the period, data compiled by Bloomberg show.
CLSA Cut
The Sensex has retreated 22 percent from a Nov. 5 peak, exceeding the 20 percent level marking a so-called bear market for some investors. Companies on the measure are valued at 13.6 times estimated earnings, down from 21.5 times last March. The MSCI Emerging Markets Index trades at a multiple of 9.6 times.CLSA Asia-Pacific Markets lowered its target on the Sensex to 18,200 from 19,500, according to a note today.
“While the sharp correction in the market may suggest attractive valuations, we note that the pace of corporate earnings downgrades has intensified in the recent results season,” CLSA analysts led by Mahesh Nandurkar wrote.
Earnings for 46 percent of Sensex companies missed analyst estimates in the quarter ended June 30, according to Bloomberg data. That compares with 33 percent that lagged forecasts in the previous quarter.
Reserve Bank Governor Duvvuri Subbarao said Aug. 12 that it’s “too early to say” whether India’s policy stance to raise borrowing costs will be changed. The central bank meets on Sept. 16 to review policy.
Benchmark wholesale-price inflation in July climbed 9.22 percent from a year earlier after a 9.44 percent jump in June.
State Order
Coal India tumbled 4.7 percent to 373.9 rupees and its August futures settled at 371.65 rupees. The stock’s surge 18 percent surge this year is the best among Sensex companies. The pollution control board of India’s Jharkhand state has ordered a unit of the miner to close 22 open cast and underground mines, Press Trust of India reported yesterday.Tata Consultancy slid 1.9 percent to 962.6 rupees and larger rival Infosys Ltd. fell 1.1 percent to 2,250.9 rupees. Wipro Ltd. (WPRO), the third-biggest software services provider, shed 0.9 percent to 329.85 rupees. India’s largest software exporters get at least 80 percent of their sales from abroad.
Tata Motors Ltd. (TTMT), the biggest truckmaker and owner of Jaguar Land Rover, fell 3.7 percent to 700.75 rupees. The stock has dropped 46 percent this year and is the worst performer on the 30-member Sensex. Morgan Stanley yesterday cut its earnings estimate for the year through March 2012 by 30 percent, citing a “deteriorating global macro environment.”
Earnings Estimate
Maruti Suzuki India Ltd. (MSIL), the largest carmaker, decreased 3.2 percent to 1,114.5 rupees and its August futures settled at 1,116 rupees. Kotak Institutional Equities today lowered its price target on the stock to 1,475 rupees from 1,515 rupees and cut its earnings estimates by 3 percent to 9 percent.State Bank of India (SBIN), the nation’s biggest lender, plunged 3.6 percent to 1,989.75 rupees and its nearest rival ICICI Bank Ltd. (ICICIBC) shed 1.2 percent to 842.2 rupees. Axis Bank Ltd. (AXSB), the fourth-largest lender by market value, dropped 3.1 percent to 1,049.7 rupees. Indian banks need “substantial capital” to support the nation’s economic growth, central bank’s Sinha said.
A drop in regional equities also contributed to today’s fall. The MSCI Asia Pacific Index sank 1.2 percent as investors weighed what the Federal Reserve will do to bolster the economy.
Fed Chairman Ben S. Bernanke and other central bankers meet this week in Jackson Hole, Wyoming, amid signs of a slowing U.S. recovery. Data today showed German business confidence fell to its lowest in more than a year, while a report may show U.S. business-equipment demand declined. Moody’s Investors Service cut Japan’s credit rating by one step, saying “weak” prospects for growth will make it difficult to tackle public debt.
Foreign investors have sold $1.8 billion of equities this month, set for the worst monthly outflow since May 2010, as higher borrowing costs weighed on company earnings and the government curbed its decision making amid corruption scandals.
Overseas investors sold a net 7.66 billion rupees ($167 million) of Indian equities on Aug. 22, paring their investment in stocks this year to 18 billion rupees, according to data on the website of the Securities and Exchange Board of India.
To contact the reporters on this story: Santanu Chakraborty in Mumbai at schakrabor11@bloomberg.net; 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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