Mumbai:Indian stocks fluctuated. Lenders fell as higher oil prices stoked concerns energy costs will fan inflation. Auto makers led by Tata Motors Ltd advanced after selling more vehicles last month.
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ICICI Bank Ltd, the second biggest bank in the country, fell 1%, while HDFC Bank Ltd, the third largest, lost 0.3%. The Bombay Stock Exchange’s (BSE) Bankex Index dropped, paring a two-week rally. Oil on Monday settled at the highest level since September 2008, prompting concern that inflation may lead to higher borrowing costs in India.
Tata Motors, India’s biggest truck maker, reached a three-month high after sales rose 11% in March.
“Inflationary challenges remain and with interest rates trending upwards, margins are likely to remain under pressure for banks,” said Jagannadham Thunuguntla, chief strategist at SMC Global Securities Ltd. Bank stocks are taking a breather after rallying in the past few sessions.
The BSE sensitive index, or Sensex, was little changed at 19,686.82. The gauge, which swung between gains and losses seven times, climbed to the highest level since 6 January on Monday. The S&P CNX Nifty on the National Stock Exchange was little changed at 5,910.05. The BSE-200 Index rose 0.3% to 2,424.77.
Tata Motors added 1.97% to Rs1,279, the highest close since 5 January. Sales climbed 11% to 83,363 vehicles in March, the company said on 1 April. Hero Honda Motors Ltd, India’s top motorcycle maker, advanced 1.71% to Rs1,646, its 11th day of gain, the longest winning run on record. Sales surged 24% to a record 515,852 units in March from a year earlier, the company had said on 1 April.
The domestic consumption story remains intact, said D.K. Aggarwal, chairman of SMC Wealth Management Services Ltd in New Delhi. “There is concern about oil prices and inflation, which is not good for us,” he said.
ICICI Bank fell 0.98% to Rs1,108.30, while HDFC Bank lost 0.29% to Rs2,391.50. Housing Development Finance Corp. Ltd, the top mortgage lender, declined 1% to Rs698.50.
Reliance Industries Ltd, India’s most valuable company, dropped 0.56% to 1,043.95. Larsen and Toubro Ltd, the biggest engineering company, slid 1.42% to Rs1,666.10. The two companies have an 18% weight in the benchmark.
The Sensex jumped 9.1% in March, the biggest monthly advance since September, as foreign funds turned net buyers of Indian stocks in 2011. Global funds purchased a net Rs4,350 crore of equities on 31 March, 1 April and 4 April, based on preliminary data from the National Stock Exchange.
That more than offset an outflow of Rs2,500 crore from 3 January through 30 March, according to the most recent data from the Securities and Exchange Board of India.
“Shares have run up too fast, too soon,” said Jitendra Panda, senior vice-president at Motilal Oswal Securities Ltd in Mumbai. “Inflation remains a concern with high oil prices. We expect some correction and consolidation this week,” he said. Motilal is advising clients to refrain from buying shares, he added.
The Sensex has declined 4.7% this year as concerns that rising interest costs will crimp economic growth. Companies on the benchmark index trade at an average 15.5 times estimated earnings, compared with 21.5 times in March 2010, data compiled by Bloomberg show.
India’s economic expansion and corporate earnings lured foreign funds to buy a record $29.4 billion of local equities last year and made the Sensex the best performer and most expensive among the world’s 10 biggest markets.
Graphic by Yogesh Kumar/ Mint