Sensex drops tracking Asian peers, pares weekly gain

Sensex drops tracking Asian peers, pares weekly gain

Mumbai: The country’s benchmark stock index fell, paring the first weekly gain in three, as Asian markets slid amid signs economic recovery in the US is faltering.

Tata Motors Ltd, the nation’s biggest truck maker, lost 2.3% and Housing Development Finance Corp. Ltd, the largest mortgage-lender, retreated 2.9%. Asia’s benchmark stock index is headed for its longest run of weekly losses since the collapse of Lehman Brothers Holdings Inc., after a government report showed on Thursday that more Americans than forecast filed for unemployment benefits last week. Reliance Communications Ltd., India’s second largest cell-phone operator, led other Reliance Group companies controlled by Anil Ambani higher after a court rejected pleas by public interest litigators seeking to probe the billionaire.

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“The data flow from the US is not encouraging," said Suhas Naik, who oversees management of $100 million of assets as chief operating officer at IL&FS Portfolio Management Services Ltd. “Global markets will remain uncertain, and perhaps grow more risk averse."

The Bombay Stock Exchange Sensitive Index, or Sensex, fell 117.70, or 0.6%, to 18,376.48 at the close in Mumbai, paring the weekly gain to 0.6%. The S&P CNX Nifty Index on the National Stock Exchange declined 0.6% to 5,516.75. Its June futures traded at 5,533.80. The BSE 200 Index slid 0.7% to 2,282.42.

The Sensex has lost 10% this year amid concern higher borrowing costs will crimp earnings. Stocks on the measure are valued at an average 14.8 times estimated profit, down from 21.5 times in March 2010, last year’s high. The MSCI Emerging Markets Index trades at 11.1 times earnings.

“We are slightly underweight, we see some more challenges ahead for the authorities," said Mark Konyn, chief executive officer at RCM Asia Pacific Ltd. “We expect rates to go up again as in many of the economies in the region." Rising consumer prices and a 33% gain in oil prices the past year have forced the central bank to raise rates nine times in 15 months. Some 33% of the companies in the Sensex reported profits that missed analysts’ estimates in the March quarter, compared with less than a quarter that did so last year.

“The central bank is expected to raise rates by a further 75 basis points by October," said T.S. Harihar, co-head of institutional derivatives at ICICI Securities Ltd. “This will lead to a de-rating in stocks and 10% to 15% cut in price-earnings multiples of most companies," he said.

The MSCI Asia Pacific Index slid 0.5% to 133.84. Monthly payrolls data due Friday may show employers added 170,000 jobs in May, following a 244,000 increase in April, economists forecast.

The BSE Mid-Cap Index has fallen 12% this year, exceeding losses in the Sensex.

“Mid-capitalization Indian companies offer greater value than large caps, and the fact they have underperformed is good news," Chirag Setalvad, a fund manager at HDFC Asset Management Co., India’s second biggest money manager with 86,300 crore in assets, said in an interview.

Tata Motors fell for a third day, losing 2.3% to 1,023.80, its lowest close since 9 September. Its June futures settled at 1,029.90. Housing Development Finance Corp. declined 2.9% to 660.05.