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India Stocks Extend Losses as Investors Assess Higher Valuations

India Stocks Fall as Investors Weigh Rapid Recovery in Prices

(Bloomberg) -- Indian stocks fell, extending their earlier losses, as investors weighed whether valuations have become too stretched following two straight weeks of gains.

The S&P BSE Sensex declined 2.1% to 33,538.37 by the 3:30 p.m. close in Mumbai, while the NSE Nifty 50 Index slipped by the same magnitude. Both measures have rebounded about 30% since their record slide on March 23.

The price-to-earnings ratio for the Sensex has already returned to its long-term average for the past seven years and in the previous two days the index has failed to cross its 100-day moving average, seen as a technical threshold for a bullish streak to continue.

“After a 30% rally, I don’t think there is major value left in the market,” said A. K. Prabhakar, head of research at IDBI Capital Market Services Ltd. in Mumbai. “The run-up in prices has spread to some companies that might not survive the next few years.”

Eleven out of 34 Nifty 50 companies that have reported quarterly results so far have beaten or matched analyst estimates. India is easing its nationwide lockdown designed to curb the spread of coronavirus infections, even as cases continue to rise.

The yield on the most-traded 6.45% 2029 bond rose by one basis point to 5.99%, while the rupee dropped 0.3% to 75.7850 per U.S. dollar.

The Numbers

  • All 19 sector sub-indexes compiled by BSE Ltd. dropped, led by a gauge of telecom companies
  • Twenty-five Sensex shares fell while five rose
    • Reliance Industries Ltd. contributed the most to the index decline, slipping 2.2%, while State Bank of India Ltd. had the biggest slump, falling 5.6%
    • IndusInd Bank Ltd. provided the biggest boost to the index and gained the most, rising 4.5%

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