Mumbai: Indian equities declined, with the benchmark index posting its biggest weekly drop since November, amid concern the recent rally has made valuations expensive and as earnings for some companies trailed analysts' forecasts.
The BSE India Sensitive Index, or Sensex, slid 0.6 per cent to 19,781.19 at the close. The 30-stock gauge lost 1.6 per cent this week, the most since the week ended November 16. Bharti Airtel, India's largest cell-phone operator, sank 3 per cent in a seventh day of losses as profit trailed estimates.
Bharat Heavy Electricals retreated 1.2 per cent after the country's biggest power-equipment maker reported a worse-than-expected 17 per cent drop in earnings. "Earnings have to play a supporting role for the markets to scale higher," Deven Choksey, managing director at K.R. Choksey Shares & Securities, said by phone from Mumbai yesterday.
"Investors should use these dips as an opportunity to buy as the overall trend remains positive." The Sensex completed a third month of gains yesterday as foreign funds purchased a net $4.1 billion of local shares in January, a record for the period, according to data. The 30-stock gauge trades at 15.8 times estimated earnings, near the highest level in a year, the data show.
The MSCI Emerging Markets Index is valued at 11 times. Five out of 17, or 29 per cent, of Sensex firms that have posted December-quarter earnings have trailed estimates, compared to 40 per cent in the previous two quarters. "We've had a sharp price-to-earnings expansion, now we need to see an earnings expansion," Arvind Sanger, managing partner at Geosphere Capital Management, told Bloomberg TV India on Thursday. "The real issue is fundamentals must follow."
Bharti slumped 3 per cent to Rs329, completing the longest stretch of losses since August 2011. Third-quarter net income declined to Rs2.84 billion ($53 million), missing the Rs8.39-billion median of analysts' estimates in a survey. Bharat Heavy lost 1.2 per cent to Rs225. Net income fell to Rs11.8 billion in the December quarter. The median of 34 analyst estimates was Rs13.5 billion. Sales dropped almost 5 per cent.
Tata Motors, the owner of Jaguar Land Rover luxury brands, sank 10 per cent intraday before recovering to close 5.5 per cent lower at Rs281. UltraTech Cement, which is not a Sensex member, also tumbled 10 per cent before ending the day 3.4 per cent lower at Rs1,837. Tata Motors' January sales plunged 30 per cent from a year earlier, the company said in a statement after markets closed.
The National Stock Exchange of India is investigating the plunge in the shares of the two companies, spokeswoman Divya Malik Lahiri said by phone.