Indian Stocks Swing as National Election Enters Final Lap

(Bloomberg) --

India stocks plunged in a last-hour selloff as investors weighed positions ahead of the national election results due next week and as escalation in the trade war between the U.S. and China remained an overhang on the region’s risk assets.

The S&P BSE Sensex dropped 1%, after fluctuating between gains and losses for most of the session. The selling pushed the index to briefly breach the 100-day moving average and close at a two-month low of 37,090.82 in Mumbai.

It was the ninth consecutive session of decline for the gauge, its longest stretch of losses since February, data compiled by Bloomberg show. The NSE Nifty 50 Index fell 1.2% while the India NSE Volatility Index -- a gauge of expected swings used to price options -- reached its highest level since September 2015.

India’s marathon general election is now in its final phase with 59 seats in eight states going to vote on May 19. The results will be declared on May 23. On the earnings front, 17 of the 27 Nifty companies that have reported so far have either met or exceeded estimates.

Strategist View

• “Investors had excess leverage positions and a cleansing was required to bring some sanity which is what we saw today,” said Gaurang Shah, chief investment strategist at Geojit Financial Services Ltd. in Mumbai. ”We are advising clients to stay away and sit on cash till election results are out next week.”
• “Equity valuations are at an all time high and there is a significant downside to earnings. We see a persistent and pervasive downturn across the consumer sector,” said Vijay Krishna-Kumar, head of liquid alternatives investment and IDFC Asset Management Co. “Some of this is related to regulatory changes, but some of it is real.”

The Numbers

• All but one of the 19 sector sub-indexes compiled by BSE Ltd. declined, with a gauge of healthcare companies falling the most
• ITC Ltd. contributed the most to the index decline, decreasing 2.8%. Sun Pharma had the largest drop, falling 9.3%.
• Housing Development Finance Corp provided the biggest boost to the index and had the largest gain, advancing 1%
• Tata Steel Ltd. fell 3.1% after joint venture with Thyssenkrupp was called off

Analyst Notes

• Weak Demand, Rural Growth to Keep India Auto Sector in Slow Lane
• Eicher Motors Falls Most in Three Months as Net Misses Estimate

--With assistance from Ravil Shirodkar.

To contact the reporter on this story: Nupur Acharya in Mumbai at nacharya7@bloomberg.net

To contact the editors responsible for this story: Divya Balji at dbalji1@bloomberg.net, Ravil Shirodkar, Kasper Viita

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