Sensex drops, halting election rally

India’s benchmark stock index dropped, snapping a three-day, 20 per cent advance, as investors judged as excessive gains triggered by the outcome of a general election.

DLF Ltd, the country’s largest developer, dropped 7 per cent. ICICI Bank Ltd, the second-biggest, lost 6.3 per cent. Financial companies led declines, halting a 16 per cent rally driven by speculation that Prime Minister Manmohan Singh-led government will accelerate economic reforms after winning the most seats in parliament elections that ended last week.

“This is normal, it was expected,” said Vaibhav Sanghavi, a director at Ambit Capital Ltd in Mumbai, who manages funds for wealthy individuals. “This is a correction after such a big move.”

The Sensitive Index, or Sensex, declined 241.37, or 1.7 per cent, to 14,060.66. The gauge’s 14-day relative strength index, measuring how rapidly prices rose or fell during the specified period, has been above 70 since May 18. Some investors regard readings at 70 and above as a signal to sell.

The S&P CNX Nifty Index on the National Stock Exchange slid 1.1 per cent to 4,270.30. The BSE 200 Index gained 0.2 per cent to 1,692.43. SGX Nifty futures for May delivery fell 0.8 per cent to 4,283.

Bharti Airtel Ltd, India’s largest mobile-phone operator, dropped 6.1 per cent to Rs 859.65, while Reliance Communications Ltd, the second biggest, slid 2.2 per cent to Rs 309.20.

Reliance Sale
Reliance Communications also fell after a shareholder raised $163 million selling shares in the company, according to a document sent to fund managers on Wednesday. The unidentified investor sold 27.3 million Luxembourg Stock Exchange-quoted global depositary receipts of the Mumbai-based company at $5.99 apiece, the e-mailed document said. UBS AG managed the sale.

Bharat Heavy Electricals Ltd, the country’s leading power-equipment maker, lost 6.1 per cent to Rs 2,036.55.

DLF retreated 7 per cent to Rs 353.75. ICICI Bank slid 6.3 per cent to Rs 708.90, ending a three-day, 41 per cent gain. Both companies have had relative strength indexes above 70 since May 18.

The following shares were among the most active on the exchange:
Aban Offshore Ltd fell 3.5 per cent to Rs 874.05. The Indian oil-drilling company was downgraded to ‘sell’ at Kotak Securities Ltd, which cited the stock’s “expensive valuations.”

Airlines: Jet Airways (India) Ltd rose 14 per cent to Rs 278.35 and Kingfisher Airlines Ltd rose 28 per cent to Rs 56.65. The two largest domestic carriers surged to seven-month highs in Mumbai on speculation the country’s new government may ease investment rules.

Indiabulls Real Estate Ltd gained 2.9 per cent to Rs 206.15. The No 3 developer raised Rs 2,660 crore ($555 million) selling shares to institutions, the company said in a statement to the Bombay Stock Exchange. The developer said it sold 143.6 million shares at Rs 185 apiece.

Tata Group: Tata Motors Ltd jumped 19 per cent to Rs 363.25. The Indian automaker, aiming to refinance a bridge loan taken to buy Jaguar and Land Rover, is planning to sell Rs 4,200 crore of debentures, credit rating company Crisil Ltd said.

Tata Steel Ltd rose 13 per cent to Rs 371.50. The biggest producer of the alloy said it had sold Rs 1,500 crore of debentures to Life Insurance Corporation of India and the size of the placement may increase to as much as Rs 2,000 crore. The funds will be used for its UK unit Corus, Tata Steel spokesman Sanjay Choudhry said by phone in Mumbai.