India’s benchmark stock index capped its first weekly decline in three weeks as ICICI Bank reported its biggest drop in quarterly profit in at least 15 years as provisions for bad loans surged.
ICICI and State Bank of India, the nation’s biggest lenders, were the worst performers on the S&P BSE Sensex this week. Bharti Airtel, the largest mobile-phone operator, fell the most in three weeks. Vedanta, a producer of aluminium and copper, rose for the first time in three days after its earnings report.
India’s benchmark Sensex index rose 0.01%, or 3.52 points, to close at 25,606.62. So far this year, the Sensex has fallen 1.96%.
The gauge lost 0.9% this week and yesterday’s decline pared the monthly gain to 1%. Bad-loan concerns resurfaced after ICICI Bank’s results. Eleven banks in India reported losses in the three months ended December amid surging bad loans after the nation’s central bank began an audit, known as the asset-quality review, on October 1.
“ICICI Bank is a heavyweight and its earnings have spooked the market,” Paras Bothra, a Mumbai-based vice president of equity research at Ashika Stock Broking, said by phone.
“And the state-owned banks are yet to announce their earnings.”
ICICI Bank said profit plunged 75% to Rs 7bn ($105mn), missing the Rs30.7bn average of 25 estimates compiled by Bloomberg.
The lender set aside Rs36bn as buffer for possible defaults. The stock slid 1.3%, extending the weekly loss to 6%, the most on the Sensex. State Bank lost 1.6%. So far, five out of nine Sensex companies that have reported March-quarter results beat or matched analyst estimates.
The Sensex has risen 12% from a February low as the risk-on sentiment returned to Asia. Foreigners bought $588mn of local shares this month, adding to last month’s inflow of $4.1bn, which was the most in three years.
There’s concern that flows into equities may slow after the Bank of Japan this week held off from adding to its monetary stimulus and the US Federal Reserve kept its benchmark rate unchanged.
“We’re in a consolidation phase after the big rally,” Kaushik Dani, a fund manager with Karvy Stock Broking in Mumbai, said by phone. “Investors are pausing, digesting the rally and will move depending on how the earnings pan out.”
Vedanta jumped 4%, ending a two-day, 6.3% drop. The company reported fourth quarter net income before exceptional charges at Rs9.55bn, beating the Rs5.63bn estimated by analysts. It sales in the March quarter was Rs158.3bn compared with an estimate of Rs154.8bn.
Mahindra & Mahindra, a tractor maker, slid 1% in a second day of declines. Bharti Airtel fell 2.4% to pare this month’s gains to 3.7%.
Foreign investors bought $36mn of local stocks on April 28, taking this year’s inflows to $1.8bn.
The Sensex has retreated 2% this year and trades at 15.7 times 12-month projected earnings versus 11.8 for the MSCI Emerging Markets Index.
Meanwhile the rupee strengthened against the US dollar yesterday amid mixed cues from Asian currencies markets and a modest gain in local shares.
The currency closed at 66.33, up 0.29% from its previous close of 66.52. The rupee opened at 66.49 a dollar and touched a high and a low of 66.28 and 66.56, respectively, in intraday trade.
Asian currencies were trading mixed against the US dollar. Malaysian ringgit was down 0.192%, Philippines peso 0.16%, China renminbi 0.166%, South Korean won 0.114% and China offshore declined 0.089%.
However, Japanese yen was up 0.952%, Thai baht 0.206%, Singapore dollar 0.164% and Taiwan dollar 0.09%.
Year to date, the rupee has weakened 0.27%, while foreign institutional investors have bought $1.77bn from the local equity market and sold $372mn in the debt market.
The dollar index, which measures the US currency’s strength against major currencies, was trading at 93.38, down 0.41% from its previous close of 93.761.
The American economy expanded at the slowest pace in two years, 0.5% in the first quarter of the calendar year. On Thursday, the Bank of Japan (BoJ) left monetary policy unchanged. Earlier, the US Federal Reserve kept its benchmark rate unchanged following a two-day meeting.
Meanwhile, India’s 10-year bond yield closed at 7.436%, as compared with its Thursday’s close of 7.441%.