 "Market Crash image via Shutterstock")
Stocks slid for a third day, sending the benchmark index to a two-week low, as lenders tumbled amidst rising bad loan concerns and as investors awaited the Federal Reserve's decision on monetary policy. Axis Bank plunged 7.5 per cent, the most in two months, on asset-quality concerns, while ICICI Bank, the biggest private lender, slid to a four-week low.
Lupin capped its steepest three-day loss since July after the drugmaker on Tuesday posted profit and sales that missed estimates. NTPC, the nation's top power generator, fell the most in five weeks. The S&P BSE Sensex lost 0.8 per cent to 27,039.76 at the close in Mumbai. A gauge of 10 lenders was the worst performer among industry indexes amid concern soured debt at Axis Bank may rise further.
More than Rs 580 crore ($89 million) of the lender's debt turned sour in the September quarter, according to an after hours filing Tuesday. Lenders have a combined 23 percent weighting in the Sensex.
"Earlier, the stress was seen in state-run banks but now we're seeing that even private lenders aren't insulated," Lancelot DCunha, chief executive officer at Crest Wealth Management Pvt, said in an interview to Bloomberg TV India. "We could see some more fall in banks' shares."
Axis Bank plunged the most since August 24, while ICICI Bank tumbled 4.4 per cent, the most in two months. The lenders were the worst performers among the Bloomberg Asia Pacific Banks Index's 56 members. Bank of Baroda, the second-biggest lender by assets, slid 2.6 per cent, while larger rival State Bank of India fell to its lowest level since October 6.
Restructured loans
Axis Bank said on Tuesday that it has sold Rs 1,850 crore ($284 million) of stressed assets to so-called asset- reconstruction companies. These companies buy nonperforming and restructured loans, and sell them off after reviving struggling debtors through fund infusions and changes in business strategy.
"The problem with restructured assets is that they become non-performing loans over a period of time," Dcunha said. "That is the biggest concern."
Stocks also fell as investors are awaiting commentary from the Fed's Wednesday meeting and some of India's biggest companies reported earnings that missed estimates. Nine of the 14 Sensex firms, or 64 per cent, that have announced September- quarter results have matched or beaten estimates. That compares with 60 per cent in the June quarter and 40 per cent in the three months ended March.
Bihar elections
"Investors are in a pause mode due to the Fed meeting and the quarterly earnings have been a bit weak," Alex Mathews, the head of research at Geojit BNP, said by phone from the southern state of Kerala. Mathews said he is advising investors to "lighten up their portfolios" before the Bihar state election results on November 8.
The ongoing elections in Bihar are important for Prime Minister Narendra Modi's efforts to control the upper house of parliament, where opposition lawmakers have blocked major economic proposals including a nationwide sales tax. A win would give him momentum in about a dozen more state elections through 2017 that will determine control of the body.
The Sensex has fallen 1.7 per cent this year and trades at 15.6 times projected 12-month earnings, compared with the MSCI Emerging Markets Index's multiple of 11.3. The Indian gauge is set for a 3.7 per cent advance this month, the most since January, as foreign funds returned to emerging markets amid signals the Fed will delay raising borrowing costs until 2016.
Foreigners were net buyers of Indian stocks for an 11th day on October 26, the longest run of inflows since the 12 days through March 9. The Fed is expected to stand pat on Wednesday on interest rates while keeping options alive for its next meeting in December. The Bank of Japan also meets this week.
