Indian stocks fell to a one-week low, paring the fifth quarterly gain, as software exporters led declines on concern that a stronger rupee will cut the value of overseas earnings.
Infosys Technologies Ltd and Tata Consultancy Services Ltd dropped for the fourth day as the rupee rose 0.3 per cent, boosting its gain this year to 3.5 per cent, the second-best performer among the 10 most actively traded currencies. Software makers get about 40 per cent of their revenue in the US dollar.
The Bombay Stock Exchange’s Sensitive Index, or Sensex, fell 62.40, or 0.4 per cent, to 17,527.77. The index has risen 0.4 per cent this year, its smallest gain in five quarters. The S&P CNX Nifty Index on the National Stock Exchange dropped 0.3 per cent to 5,249.1, while the BSE 200 Index lost 0.2 per cent to 2,199.5.
“The rupee’s gain is going to affect technology stocks badly,” said Dinesh Dalmia, director of Yashwi Securities Pvt in Kolkata. “They won’t be able to make gains when the rupee starts moving up.”
Infosys, the second-largest software services provider, slid 1.1 per cent to Rs 2,615.95 rupees, while larger rival Tata Consultancy Services Ltd declined 2.4 per cent to Rs 780.65.
Overseas investors were net purchasers of Indian stocks for a 19th day on March 29, buying a net Rs 1,030 crore ($229 million). Their purchases of the equities total Rs 19,800 crore so far this year, according to the market regulator.
Risk takers
“Investors who entered the markets in 2009 were risk takers, but those kinds of returns are not available today,” said Avinash Gupta, an analyst at Bonanza Portfolio Ltd, a stockbrokerage in New Delhi. “Some investors, including foreign funds, are betting on the long-term India growth story, and the markets will likely to stay in a range for some time now.”
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Kotak Securities said in a note to clients today that it moved 7.5 per cent of its model portfolio to cash, citing valuations. The Sensex is trading at 21.3 times estimated earnings, the highest in Asia excluding Japan, according to data compiled by Bloomberg.
The price-to-earnings ratio of the Sensex touched 26.5 this week, the highest level since at least 2000 when Bloomberg started tracking the data.
“We find very few strong investment ideas among large-cap names currently, given full-to-rich valuations for the India-specific consumer and investment stories and doubts about sustenance of the commodity cycle,” Kotak analysts led by Sanjeev Prasad said in the note. Prasad has been rated India’s top-ranked analyst in the past four years in Asia Money polls.
Hero Honda, ITC
Hero Honda Motors Ltd, India’s biggest motorcycle maker, fell 1.2 per cent to Rs 1,944.4, declining for a fourth day. The stock is trading at 30.3 times reported earnings, the eighth-most expensive stock on the Sensex. ITC Ltd, the nation’s biggest cigarette company, declined 2.2 per cent to Rs 263.05, the most in more than a month. The stock is trading at 29.8 times reported earnings, the ninth most expensive, according to data compiled by Bloomberg.
Foreign fund inflows into India’s stock market climbed to a record Rs 834.2 crore in 2009, beating the previous high set two years earlier in local currency terms, as the biggest rally in 18 years lured foreign investors. They sold a record Rs 529.9 crore of shares in 2008, triggering the biggest ever annual decline.