India Stocks Drop on Eve of Quarterly Earnings Reports

(Bloomberg) -- India stocks declined at the end of a volatile trading day as investors weighed the gradual resumption of business activity against a steady rise in new coronavirus cases, ahead of the quarterly earnings season starting on Thursday.

The S&P BSE Sensex fell 0.9% to 36,329.01 at the 3:30 pm close in Mumbai, after rising as much as 0.4% earlier. The NSE Nifty 50 Index also slipped 0.9%. The measures have risen for the past five days and are just short of breaking through the 200-day moving average, a key technical barrier. A gauge of smaller company stocks has already breached the indicator.

Signs of economic growth are re-emerging in India as business gradually reopens from a prolonged lockdown. Still, India’s coronavirus epidemic has become the third biggest in the world as infections surged after containment was eased. A collapse in inflows to equity mutual funds in the month of June also weighed on sentiment.

“We are at a stage where valuations are very high and that’s made investors more sensitive to any negative data,” said Sameer Kalra, an investment strategist at Target Investing in Mumbai. “July data on inflows to mutual funds will be closely scrutinized now.”

Read: Smaller Stocks Signal India Equity Rebound Is Broadening: Chart

“Investors would want to know the outlook for business going ahead, as most expect the earnings impact to last for at least two quarters,” said Chokkalingam G, head of investment advisory at Equinomics Research & Advisory Pvt. in Mumbai.

Earnings for most companies suffered between April and June due to the lockdown aimed at curbing the spread of coronavirus. Tata Consultancy Services Ltd., Asia’s biggest software exporter, will announce results tomorrow.

The yield on the benchmark 10-year government bond fell to 5.78%. The rupee depreceated 0.1% to 75.0225 per U.S. dollar.

The Numbers

Sixteen of 19 sector sub-indexes compiled by BSE Ltd. fell, led by a gauge of real estate companies.
Reliance Ltd. was the biggest drag on the index, slipping 1.5%, Bajaj Finance Ltd. had the biggest drop, declining 4.5%; IndusInd Bank Ltd. had the largest gain, rising 5.1%.