India stocks down amid earnings concerns

Indian stocks dropped, with the benchmark index heading toward a second month of declines, as concern that earnings growth will disappoint mounted and overseas funds pared their holdings of local shares.

ICICI Bank Ltd. tumbled to a six-month low after posting the slowest quarterly profit growth in five years. State Bank of India was the worst performer on the S&P BSE Sensex. Infosys Ltd. extended its loss to a three-month low after the software maker on Friday announced profit that trailed estimates.

The Sensex decreased 1 per cent to 27,176.99 at the close, extending last week’s 3.5 per cent drop that was the most since the period ended December 12. While five of the seven Sensex firms have posted results so far have matched or exceeded estimates, the gauge’s earnings for the January to March period will fall for a second straight quarter, estimates compiled by Bloomberg show. UBS AG reduced its December target for the CNX Nifty by 4 per cent last week.

“Many people thought the change in government will immediately lead to higher growth and higher earnings, and obviously that’s far from the truth,” Sukumar Rajah, chief investment officer for Asian equity at Franklin Templeton Investments, said in an interview with Bloomberg TV India. “The expectations were too high.”

Global funds have cut holdings of rupee-denominated debt by $322 million this month, headed for the first withdrawal since last April, and have been net sellers of shares on eight of the past nine days amid a row over back taxes.

Notices have been sent to 68 overseas funds for arrears of Rs6 billion ($96 million) toward minimum alternate tax (MAT), junior finance minister Jayant Sinha said on Friday. Tax authorities clarified the same day that foreign investors can seek relief using the Double Taxation Avoidance treaties signed between India and their countries of residence. The levy has been scrapped in the financial year started April 1.