Sensex sheds 1.1% to close at two-week low

25/05/2015 17:22 AST

The benchmark index Sensex on Monday declined by the most in two weeks as metal producers and consumer companies fell before the expiry of monthly derivatives on Thursday.

Vedanta Ltd, India’s largest copper and aluminium refiner, slid to a six-week low, and Tata Steel Ltd retreated to the lowest price since 6 April. ITC Ltd decreased to an 11-month low after its quarterly profit missed estimates. Tata Power Co. lost 1.5% after the Bombay Stock Exchange (BSE) said the stock will be dropped from the S&P BSE Sensex starting 22 June. The Sensex lost 1.1% to close at 27,643.88 points, the most since 12 May. The 50-stock Nifty index lost 1.1%, while the India VIX Index posted a fourth day of losses, the longest run since the period ended 30 April.

The Sensex had risen to a five-week high on Friday as bets mounted that slowing inflation will give the central bank room to ease monetary policy next month.

While 52% of the Sensex members that have posted results for the March quarter have exceeded or matched estimates, earnings will fall for a second quarter, show forecasts compiled by Bloomberg.

The index trades at 15.3 times projected 12-month profits, compared with the MSCI Emerging Markets Index’s multiple of 12.3.

“The valuations are extended as expectations of corporate earnings are low,” said Chakri Lokapriya, chief investment officer at TCG Advisory Services Pvt, Ltd in Mumbai. The market “may consolidate a bit more in the near term,” he said.

ITC’s fourth-quarter earnings rose 3.5% to Rs2,360 crore from a year earlier, trailing the Rs2,520 crore estimated in a Bloomberg survey. The stock tumbled 2.4%. Results were announced after market hours on Friday.



‘Moderate Growth’

The Sensex completed its third weekly gain on Friday, the longest run since March, amid bets that Reserve Bank of India (RBI) governor Raghuram Rajan would cut interest rates for a third time this year at the 2 June review.

While consumer prices slowed to a four-month low in April, factory output grew 2.1% versus an estimated 3% rise, official data showed on 12 May.

“Economic growth is relatively moderate and it needs a boost,” said Jim Walker, managing director of Asianomics Group Ltd. “The RBI should take a signal and lower rates.”

Foreign Institutional Investors (FIIs) sold a net $28 million of Indian stocks on 21 May, paring this year’s inflows to $6.8 billion.

The Sensex has risen 0.5% this year and trades at 15.3 times projected 12-month earnings, compared with the MSCI Emerging Markets Index’s multiple of 12.3.

Bloomberg