A pedestrian is silhouetted against the Bombay Stock Exchange (BSE) building in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

India Stock Bears Tighten Grip in Thin Trade on Weak Global Cues

(Bloomberg) -- Indian stocks declined for a third day in holiday-thinned trading as the threat of slower global growth and its impact on corporate earnings added to uncertainty at the end of a tough year.

The S&P BSE Sensex dropped 0.8 percent to 35,470.15 at the 3:30 p.m. close in Mumbai, with bulk of the losses coming in the last hour of the session. Volumes were about 40 percent below than the 30-day average. The NSE Nifty 50 Index also retreated 0.8 percent.

Markets globally were roiled last week as renewed U.S.-China tensions and concern about a partial U.S. government shutdown added to negative narratives in the wake of the Federal Reserve’s pledge to continue reversing stimulus of the past decade. At risk in India is a strengthening earnings picture that has seen profits for 50 Nifty companies grow in six of the past eight quarters, according to Bloomberg data.

Earnings at the Nifty companies are estimated to rise an average 19 percent this fiscal year that started April 1, and 22 percent next year. That compares with a 16 percent growth in the last year, according to Bloomberg data.

India Stock Bears Tighten Grip in Thin Trade on Weak Global Cues

Strategist Views

  • “We see potential risks from a global slowdown and China-U.S. trade issues, oil prices and national elections,” Kotak Securities Ltd. analysts led by Sanjeev Prasad wrote in an investor note on Dec. 20.
  • “We are neutral on stocks at these levels as a slowdown in world economy can impact EMs and bring more volatility,” said Anu Jain, partner at IIFL Investment Managers. “Elections in India are the biggest hangover on the markets and the U.S.-China trade war is a key global issue to impact equities.”
  • “It’s a period of accumulation for investors with key risks being global liquidity tightening and trade wars,” said Viral Berawala, chief investment officer at Mumbai-based Essel Finance AMC Ltd.

The Numbers

  • Sixteen of the 19 sector gauges compiled by BSE Ltd. fell, led by a gauge of property developers. An index of software exporters rose the most.
  • Two-wheeler maker Hero MotoCorp Ltd. fell the most among Sensex members, dropping 4.7 percent, after its shares were downgraded to sell at Goldman Sachs.
  • Sensex and Nifty volumes were at least 35 percent lower than the 30-day mean.

Analyst Notes

  • Profit Revival to be Key Driver for India Market in 2019: Kotak
  • JB Chemicals Rated New Buy at Anand Rathi; PT 416 Rupees
  • Hero MotoCorp Downgraded to Sell at Goldman; PT 2,773 Rupees

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