Mumbai: India’s stocks fell for the first time in four days after Reliance Industries Ltd (RIL), the nation’s most valuable company, reported fourth quarter earnings that lagged behind forecasts.
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RIL, the owner of the largest oil refining complex, fell the most in five weeks after its profit missed analysts’ earnings estimates for the fifth time in six quarters. RIL joins Infosys Technologies Ltd, the second largest software maker, in reporting profit that trailed estimates. The two companies have a 13% weight on the benchmark index.
RIL’s result has not left any room for optimism, said K.N. Rahaman, deputy head of research at Way2Wealth Brokers Pvt. Ltd in Mumbai. “The market will be under pressure as the results of heavyweights have disappointed. There’s no fresh impetus for a rally,” he said.
The Bombay Stock Exchange (BSE) sensitive index, or Sensex, fell 17.92 points, or 0.1%, to 19,584.31. The gauge swung between gains and losses at least 20 times. The S&P CNX Nifty on the National Stock Exchange declined 0.2% to 5,874.50 and its April futures settled at 5,877. The BSE-200 Index was little changed at 2,415.04.
RIL plunged 3% to Rs 1,009.10, its steepest decline since 18 March. Net income in the quarter ended 31 March rose 14% to Rs 5,380 crore ($1.2 billion) from Rs 4,710 crore a year ago, the company reported on 21 April. The average estimate of 18 analysts in a Bloomberg survey was Rs 5,430 crore. Markets were closed on 22 April for a public holiday.
State Bank of India (SBI), the largest lender, climbed to a four-month high after the central bank eased rules for provisions to cover loan defaults. SBI rose 2% to Rs 2,919.35, its highest close since 6 December.
The Reserve Bank of India (RBI) said on 22 April that lenders need to maintain a provision coverage ratio of 70%, according to their gross non-performing assets as of 30 September. It also said that most banks have achieved the coverage ratio.
It is a positive for SBI in the shorter term as otherwise the overall profits would have been lower for one or two quarters, said Santosh Singh, an analyst with Espirito Santo Securities in Mumbai.
The shares also gained after Deutsche Bank AG and JPMorgan Chase and Co. raised their recommendations for the stock.
Dhanlaxmi Bank Ltd added 1.1% to Rs 132.05 after it reported that profit in the quarter ended 31 March almost doubled to Rs 11.15 crore. Indian Bank advanced 3.3% to Rs 247.05 after its profit in the quarter ended March rose 7% to Rs 439 crore.
Axis Bank Ltd, the top-ranked underwriter of debt sales, sank 5% to Rs 1,377.15 after JPMorgan Chase and Co. downgraded the stock and as concerns over a contraction in the lender’s interest margins rose. Net interest margin narrowed to 3.44% in the quarter ended 31 March from 3.81% in the quarter ended 31 December, Mumbai-based brokerage K.R. Choksey Shares and Securities Pvt. Ltd said in a note on Monday.
The higher-than-expected margin contraction is a key concern to us, Manish Ostwal and Palak Shah, analysts at K.R. Choksey, wrote in the note. They rate the stock hold, with a price estimate of Rs 1,601.
Maruti Suzuki India Ltd, the nation’s biggest car maker, climbed 1.5% to Rs 1,326.55 after it posted a better-than-expected profit in the fourth quarter as economic growth and rising incomes boosted sales. Traders increased bullish bets after its earnings report. Open interest, or the number of contracts held by traders, in futures contracts rose 17% to 10,917, data compiled by Bloomberg show.
Sterlite Industries (India) Ltd, the nation’s largest copper producer, jumped 4.4% to Rs 186.40. It reported a better- than-expected 35% gain in fourth quarter profit, aided by higher metal prices and an increase in refining fees.
Group net income climbed to Rs 1,930 crore in the three months ended 31 March from Rs 1,430 crore a year earlier, the unit of Vedanta Resources Plc said. The average of 16 analyst estimates compiled by Bloomberg was Rs 1,400 crore. Sales rose 40% to Rs 10,000 crore.
DLF Ltd, the biggest developer, dropped 2.25% to Rs 241.50, extending this year’s decline to 17%. Jaiprakash Associates Ltd, a builder of dams, roads and bridges, fell 1% to Rs 100.70.
The Sensex has fallen 4.5% this year on concern that rising borrowing costs will crimp profit growth. Companies on the index trade at an average 16.6 times estimated earnings, compared with 21.5 times in March 2010. The MSCI Emerging Markets Index is valued at 11.7 times.
Overseas funds bought a net Rs 463 crore ($104.3 million) of Indian stocks on 20 April, taking their investments in equity this year to Rs 6,250 crore, according to data on the website of the Securities and Exchange Board of India.
Graphic by Sandeep Bhatnagar/Mint
Shikhar Balwani, George Smith Alexander and Santanu Chakraborty in Mumbai contributed to this story.