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Business News/ Market / Stock-market-news/  Sensex reverses gains as ICICI Bank, L&T tumble on earnings
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Sensex reverses gains as ICICI Bank, L&T tumble on earnings

Sensex fell for a second day amid concern the rally that sent it to a one-year high in early trade isn't supported by growth in corporate earnings

ICICI Bank declined to its lowest price in almost a month after reporting a 25% drop in quarterly profit as provisions for bad debt rose. Photo: Hemant Mishra/MintPremium
ICICI Bank declined to its lowest price in almost a month after reporting a 25% drop in quarterly profit as provisions for bad debt rose. Photo: Hemant Mishra/Mint

Mumbai: Indian stocks fell for a second day amid concern the rally that sent the benchmark index to a one-year high in early trade isn’t supported by growth in corporate earnings.

ICICI Bank Ltd, the nation’s largest private lender by assets, declined to its lowest price in almost a month after reporting a 25% drop in quarterly profit as provisions for bad debt rose. Larsen and Toubro Ltd (L&T) slid to its lowest price in a month after the biggest engineering company said investment climate still remains tepid. Drug makers Lupin Ltd and Cipla Ltd were among the worst performers on the S&P BSE Sensex.

The Sensex lost 0.17%, or 48.74 points, lower at 28,003.12 at the close. The gauge had risen as much as 0.8% earlier amid growing optimism about the likely passage of the goods and services tax (GST) bill this week and as foreign funds remained net buyers of local shares. The index on Friday capped its fifth monthly gain, which pushed up its valuations to the highest in 15 months.

“The market could not sustain the higher level as results from ICICI Bank and Larsen and Toubro disappointed investors," Dhiraj Bhutoria, a director at Varun Tradecom Pvt., a Kolkata-based brokerage, said by phone. “Stocks have rallied and earnings are not able to keep pace."

ICICI Bank tumbled 5.1%, the steepest loss since 5 April and the worst performance on the Sensex. L&T, which reported a 46% jump in June quarter profit, said domestic infrastructure order were delayed in the period as a recovery in investment is yet to gather pace. Both companies posted earnings after trading ended on Friday.

Foreigners have been net buyers of Indian shares every month since March, the quickest pace since November 2014, as above-normal rainfall improves the outlook for economic growth and corporate earnings after back-to-back drought. They bought $300 million of stocks on Thursday, the highest single-day inflow since March 31.

The rally has also been aided by optimism about the GST bill, which has been listed by the government for discussion and passage in the upper house of parliament this week. Investors are waiting to see if the government can overcome the objections of the main opposition Congress party and steer one of India’s biggest reforms into law in the current legislative session. Bloomberg

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Published: 01 Aug 2016, 10:12 AM IST
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