Sensex falls; RIL, Tata Motors lead declines

Tata Motors Ltd, India's biggest bus and truckmaker, fell to its lowest in almost four years, while Reliance Industries Ltd, the nation's most valuable company, fell to a 10-month low.

The Reserve bank's measures to tame inflation will slow growth and earnings downgrades will crimp demand for shares, HSBC said today, cutting its year-end Sensex forecast 20 per cent.

"We will see earnings downgrades especially in banking where companies will have higher losses from bond investments," said Jayesh Shroff, who helps manage about $7.2 billion at SBI Asset Management Co in Mumbai.

The Bombay Stock Exchange's Sensitive Index, or Sensex, fell 176.34, or 1.3 per cent, to 13,349.65. The S&P CNX Nifty Index on the National Stock Exchange slid 41.45, or 1 per cent, to 3,988.55.

Tata Motors declined 3.8 per cent to Rs 377.60, its lowest since August 27, 2004. Reliance fell 2.4 per cent to Rs 1,979.45, its lowest since September 7. Companies will report earnings for the quarter ended June this month.

Sensex Target
HSBC lowered its December 2008 estimate for the Sensex to 14,000 from its previous estimate of 17,500. It reduced its end-2009 target by 29 per cent to 15,000. The gauge closed at 13,525.99 yesterday.

"There is risk of the price-earnings multiple contracting in the case of further monetary tightening," Garry Evans, Hong Kong-based Asian strategist at HSBC, said in a note to clients today. "Analysts have yet to meaningfully downgrade earnings per share forecasts; this may happen after quarterly results are announced later this month.''

Overseas funds bought a net Rs 533 crore ($132 million) of Indian stocks on July 4, paring their net outflow this year from equities to Rs 645 crore, according to the country's stock market regulator.

The following shares rose or fell.

DLF Ltd added Rs 3.85, or 0.9 per cent, to 429.60. India's biggest real-estate developer plans to set up a fund that will invest in construction equipment companies, CNBC- TV18 reported, without saying where it obtained the information.

First Winner Industries Ltd: The Indian garments maker declined Rs 35.8 or 29 per cent, to 89.20. The company sold shares at Rs 125 apiece in an initial public offering last month, raising Rs 68.8 crore.

Godrej Industries Ltd rose Rs 10.85, or 7.4 per cent, to 157.10. The stock, which lost almost two-thirds of its market value this year, rose on a newspaper report that cited Chairman Adi Godrej as saying the company will propose a stock buyback to shareholders of the company.

Larsen & Toubro Ltd gained Rs 35.3, or 1.5 per cent, to 2,397.10. India's biggest engineering company said it will build a Rs 1047 crore wheel factory for the Indian Railways.

Reliance Communications Ltd. (RCOM IN) declined 4.7 rupees, or 1.1 percent, to 415.20. India's second-largest mobile-phone operator fell before the expiry of a deadline for exclusive merger talks with South Africa's MTN Group Ltd.

Reliance has fallen 24 percent since the company, controlled by Chairman Anil Ambani, said on June 13 it had received a letter from Reliance Industries Ltd. threatening to block the deal.

SpiceJet Ltd. (SJET IN) slid 0.7 rupee, or 2.3 percent, to 29.75. Indian billionaire Vijay Mallya, owner of Kingfisher Airlines Ltd., and the promoters of low-cost carrier SpiceJet differ on the airline's valuation, the Economic Times reported, without saying where it got the information. SpiceJet is also in discussions with billionaire U.S. investor Wilbur Ross for a stake sale, the newspaper said.