Mumbai: Indian shares rose for the second straight month in July after ending 0.7% lower on Friday, but underperformed emerging market peers in the month, as the central bank’s key rates hike and mixed earnings limited gains.
India’s main stock index rose 0.9% in July, but underperformed China’s Shanghai Composite Index, Brazil’s Bovespa and Russia’s RTS Index, which gained between 9.9 and 10.6% so far this month.
“For this month, we really had nothing much to cheer about,” said Prakash Diwan, head of institutional business at Networth Stock Broking.
“High inflation, two consecutive interest rate hikes, mixed corporate results, all contributed to the underperformance of our market this month.”
Diwan expects Indian market to be volatile in August due to uncertainty in the global markets.
But, for the year to date, the Indian benchmark has outsmarted its rivals other than Russia by notching a 2.3% gain. Its peers in China and Brazil shed 19.5% and 2.4% respectively while the Russian benchmark gained 2.5%.
Foreign funds have poured in $9.3 billion in Indian stocks in the year to 28 July after a record $17.5 billion in 2009.
The 30-share BSE index closed 0.69% or 123.71 points lower on Friday at 17,868.29, with 22 of its components closing in the red. The 50-share NSE index closed 0.8% lower at 5,367.60 points.
The benchmark eased, in line with weak world equities, and on disappointing quarterly earnings from Oil & Natural Gas Corp and Hero Honda.
Top motorcycle maker Hero Honda shed nearly 3% to Rs1,815.40 after it posted a 1.6% drop in quarterly net profit, its first decline in 11 quarters, and analysts said margins would remain under pressure in the current quarter as well.
JPMorgan cut its share price target for the stock to Rs1,845 by next March from Rs1,915.
“Some of the key earnings are disappointing the market. After Maruti, people were expecting Hero Honda to follow suit and that was the case,” said Diwan.
State-controlled explorer ONGC closed barely changed after dropping as much as 1.7% as it reported a more-than-expected 24.5% drop in quarterly profit, as a rise in crude oil prices meant it had to make higher subsidy payouts.
Outsourcers contributed the most to the main index’s losses on gloomy outlook by U.S. tech majors and as Federal Reserve official’s downbeat comments raised concerns over the speed of economic recovery in the world’s largest economy.
Top outsourcer Tata Consultancy dropped 1%, while smaller rivals Infosys and Wipro shed 1.6% and 1.2% respectively.
In the broader market, declining shares outnumbered gainers in the ratio of 1.2:1. A total of 367 million shares changed hands on the BSE.
ABB Ltd, a unit of Swiss engineering group ABB, fell 4.1% to Rs812.05 as it posted a 54% fall in quarterly net profit on certain exit costs in some projects and increasing pricing pressure in the market.
Hindustan Construction Company climbed 3.8% to Rs133.70 as the construction and civil engineering firm posted a 56-percent rise in quarterly net profit and also declared a 1:1 bonus share issue, sending its shares up as much as 8.3%.
Real estate firm Omaxe jumped 6.6% to 117.85 rupees on a 38.7% rise in quarterly profit.
Titagarh Wagons rose 2.3% to Rs409.40 after its April-June net profit jumped 84%.