Sensex completes weekly retreat as telecom shares slide

Mumbai: Indian stocks fell, with the benchmark index erasing a weekly advance, as energy and telecom shares dropped and investors focused on the start of the results season next week.

Bharti Airtel Ltd and Idea Cellular Ltd, the nation’s largest mobile-phone operators, slid more than 2% each after the government said it will recover money from them for understating revenues for four years. Oil and Natural Gas Corp. Ltd (ONGC), the biggest state explorer, retreated for a third day as crude oil traded below $46 a barrel. Larsen and Toubro Ltd and ICICI Bank Ltd were among the worst performers on the S&P BSE Sensex.

The benchmark gauge fell 0.3%, or 74.59 points, lower at 27,126.90 points at the close, capping a fourth weekly decline in five weeks. The gauge has rallied 18% from a low in February amid forecasts for strong rainfall after back-to-back droughts and as company earnings recovered after declines in four of the previous five periods. The market capitalization of Indian equities has grown faster than world market value in the five months ended June, making them vulnerable to global shocks, according to Credit Suisse Securities (India) Pvt. Ltd.

“After five months of outperformance, I’d stay cautious,” Neelkanth Mishra, managing director for equity research at Credit Suisse, said in an interview with Bloomberg TV India on Friday. “Nearly 40% of our free-float and trading volume is owned by foreign investors. If there’s a global risk off and people start pulling out of equity funds, India won’t stay immune. There’s only so much outperformance that we can stand.” Companies with a domestic focus “would be a good place to hide in the next 12 to 24 months” as the economy benefits from above-average rainfall and lower borrowing costs, he said.

The Sensex has risen 3.9% this year and trades at 16.3 times projected 12-months profits, versus a five-year mean of 14.3 and a multiple of 11.8 for the MSCI Emerging Markets Index, data compiled by Bloomberg show. Foreign investors bought $44 million of local shares on 5 July, taking this year’s inflows to $3 billion.

The June-quarter earnings season begins next week with Tata Consultancy Services Ltd on 14 July. Infosys Ltd and Reliance Industries Ltd will report on 15 July. About 66% of the companies in the NSE Nifty 50 Index posted March-quarter results that beat or matched estimates, versus 52% in the previous three months. Operating profits climbed 9% year-on-year, the most since September 2014, data compiled by Bloomberg show.

Bharti Airtel slid 2.3%, the most since 24 June. Idea Cellular Ltd lost 2.86%, the steepest decline since 13 June. Reliance Communications Ltd tumbled 3.2%, while Tata Teleservices Maharashtra Ltd plunged 3.75%.

Six telecom operators understated revenue by Rs.46,000 crore between 2006 and 2010, according to a report by the Comptroller and Auditor General of India. The government will recover licence fee and spectrum usage charge dues along with interest and penalty, the communications ministry said in an e-mailed statement on Thursday.

ONGC retreated 1.5% to its lowest level since 30 June. Larsen and Toubro slid 1.4% and ICICI Bank dropped 1.2%. TCS was the worst performer on the Sensex with a 3% decline. Drugmaker Lupin Ltd was the top gainer with 5.6% advance this week. Dr Reddy’s Laboratories Ltd rose 2.3% this week.