Indian shares drop second day on earnings worry
Friday, 6 January 2012
MUMBAI, Jan 5 (Reuters): Indian shares erased gains in late trade Thursday and dropped for a second session in a row on concerns quarterly results starting next week will mostly show a sharp drop in earnings growth and will weigh down the market in the near term.
Expectations moderating inflation will allow the central bank to begin cutting interest rates drove shares higher for most of the day, before investors turned cautious towards the close.
"Slowing inflation has increased hopes of a reversal in the interest rate cycle, but all eyes are on the upcoming earnings season," said Jagannadham Thunuguntla, head of research at SMC Global.
"The market is expecting more negative surprises than positives."
Most companies have struggled in the past quarter after a spate of rate rises dented consumer spending, while a slump in the rupee's value poses a big burden for companies with large foreign borrowing.
The main 30-share BSE index ended down 0.16 per cent, or 25.56 points, at 15,857.08, after rising as much as 0.6 per cent during trade. Seventeen of its components closed down.
The benchmark, which fell nearly a quarter in 2011, rose more than 3 per cent in the first two sessions of the new year, before retreating Wednesday.
Credit Suisse upgraded Indian equities to "neutral" from "underweight," citing cheap valuations, easing headline inflation and slower earnings estimate downgrades in December.
Data Thursday showed the food price index declined for the first time in nearly six years, raising hopes the December headline inflation rate will drop below 9 per cent for the first time in more than a year.
Expectations moderating inflation will allow the central bank to begin cutting interest rates drove shares higher for most of the day, before investors turned cautious towards the close.
"Slowing inflation has increased hopes of a reversal in the interest rate cycle, but all eyes are on the upcoming earnings season," said Jagannadham Thunuguntla, head of research at SMC Global.
"The market is expecting more negative surprises than positives."
Most companies have struggled in the past quarter after a spate of rate rises dented consumer spending, while a slump in the rupee's value poses a big burden for companies with large foreign borrowing.
The main 30-share BSE index ended down 0.16 per cent, or 25.56 points, at 15,857.08, after rising as much as 0.6 per cent during trade. Seventeen of its components closed down.
The benchmark, which fell nearly a quarter in 2011, rose more than 3 per cent in the first two sessions of the new year, before retreating Wednesday.
Credit Suisse upgraded Indian equities to "neutral" from "underweight," citing cheap valuations, easing headline inflation and slower earnings estimate downgrades in December.
Data Thursday showed the food price index declined for the first time in nearly six years, raising hopes the December headline inflation rate will drop below 9 per cent for the first time in more than a year.