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Indian stocks dropped for a third day this week in volatile trading, amid concern that company earnings will lag analyst estimates.
State Bank of India fell for a second day and HDFC Bank, the most valuable lender, pared gains of as much as 1.3 per cent. Tata Motors declined to a three-month low. Sun Pharmaceutical Industries, the biggest drugmaker by value, was the worst performer on the S&P BSE Sensex.
The Sensex declined 0.6 per cent to 27,735.02 at the close after changing direction at least six times. The gauge climbed from a three-week low on Wednesday after India offered overseas investors treaty benefits to defuse a row over back-taxes that cast a cloud over $48 billion in inflows. The index retreated 4.7 per cent in five days through Tuesday amid concerns that net income growth of the 30 Sensex firms will decline for a second straight quarter.
"Any upmove will be met with selling as there's lots of earnings and we enter the expiry mode next week," Gaurang Shah, a vice president at Geojit BNP Paribas Financial Services, told Bloomberg TV India on Thursday. "The markets will remain choppy" before monthly derivative contracts lapse next Thursday, he said.
Sensex company profits for the three months ended March 31 period will probably decline for a second quarter, estimates compiled by Bloomberg show. UBS AG cut its December target for the 50-stock CNX Nifty index by 4 percent on Monday, citing a slowdown in profit growth.
Earnings outlook
Macquarie Capital Securities India Pvt, the most accurate index forecaster for the past two years in Bloomberg surveys, trimmed its earnings forecast for the 30 Sensex companies by 2.2 per cent for the year through March 2016.
State Bank plunged 2.2 per cent and HDFC Bank was little changed at Rs 1,013.5. HDFC's fiscal fourth-quarter profit rose 21 per cent to Rs 2,810 crore ($450 million), almost matching the Rs 2,820 crore estimated by analysts.
Tata Motors lost 2.2 per cent to Rs 512 in a fifth day of losses, the longest losing stretch since the period ended December 17. Mahindra & Mahindra, the largest tractor maker, fell for the first time in three days.
Wipro, the third-biggest software exporter, dropped 1.9 per cent to the lowest level in 10 months.
NTPC, the biggest power producer, lost 2.1 per cent and Sun Pharma retreated 2.7 per cent.
The Sensex has risen 0.9 per cent and is valued at 15.4 times projected 12-month profits, compared with the MSCI Emerging Markets Index's multiple of 12.6.
Global investors sold a net $135.8 million of local shares on April 22, paring the year's inflows to $8.4 billion. They bought $16 billion of stocks last year.
