Sensitive Index Drops

Indian Stocks Drop, Snapping 8-Day Advance; Reliance Declines

April 16 (Bloomberg) -- Indian stocks dropped, with the benchmark index snapping an eight-day, 18 percent advance on concern a fractured verdict in the national elections may prevent a stable government formation in the country.

Reliance Industries Ltd., the nation's most valuable company, fell 5.2 percent. ICICI Bank Ltd., India's second- largest lender, slid 3.5 percent.

"It's a very closely fought election," said investor Rakesh Jhunjhunwala, ranked a billionaire by Forbes magazine last year. "It's a triangular contest and to predict the result would be very difficult." Jhunjhunwala said investors should avoid the markets after until a new government is formed.

The Bombay Stock Exchange Sensitive Index, or Sensex, fell 3 percent to 10,947.40. The S&P CNX Nifty Index on the National Stock Exchange retreated 3.3 percent to 3,369.50. The BSE 200 Index lost 3.5 percent to 1,291.37. Nifty futures for April delivery fell 3.5 percent to 3,370.55.

Prime Minister Manmohan Singh's Congress party-led United Progressive Alliance is competing with the main opposition Bharatiya Janata Party-led National Democratic Alliance and a group of communist and regional parties known as the Third Front.

Voters went to the polls today in the first phase of a five-stage election across the world's biggest democracy, with counting set for May 16. The Sensex had plunged 11 percent on May 17, 2004, the most in more than a decade, as investors feared a government formed by Sonia Gandhi's Congress party and communist allies would slow the pace of reforms.

Gains Overdone

Stocks also fell on concern that gains from lows last month were overdone. The benchmark index has climbed 34 percent since falling to its lowest level this year on March 9.

Reliance fell 5.2 percent to 1,735 rupees. Its 14-day relative strength index, which measures how rapidly prices rose or fell during the period, has been above 70 since April 1. Some investors regard readings at 70 and above as a signal to sell.

ICICI dropped 3.5 percent to 427.55 rupees. Its relative strength was above 70 yesterday.

Tata Motors Ltd., the nation's largest bus-maker, dropped 14 percent to 241.45 rupees. Tata Steel Ltd., the biggest maker of the alloy, fell 8.2 percent to 269.10 rupees. Both their relative strength indexes were above 70 since April 6.

Ranbaxy, Suzlon

Ranbaxy Laboratories Ltd., the nation's largest drugmaker, sank on a report that it may have currency transaction losses. Ranbaxy, controlled by Daiichi Sankyo Co. of Japan, fell 6.4 percent to 187.45 rupees. The drugmaker may have losses of more than 25 billion rupees ($503 million) related to currency hedging, the Economic Times said, citing unidentified people familiar with the matter. Ranbaxy spokesman Raghu Kochar declined to comment on the report in a text message.

Suzlon Energy Ltd. fell 19 percent to 55.95 rupees. Suzlon, one of the world's biggest makers of wind turbines, is facing new problems over faulty blades for a project in China's Shandong province, the Wall Street Journal reported, citing people familiar with the matter. Suzlon Chief Operating Officer Sumant Sinha said the report over faulty blades was false.

The following shares were among the most active on the exchange:

Cairn India Ltd. (CAIR IN) dropped 9.4 percent to 188.35 rupees. The unit of U.K.-based explorer Cairn Energy Plc was cut to "underperform" from "outperform" at Macquarie Group Ltd., citing lower forecasts for crude oil prices.

Gitanjali Gems Ltd. (GITG IN) rose 16 percent to 84.50 rupees after the diamond retailer said it plans to buy back shares at as much as 120 rupees apiece starting April 17.

Jet Airways India Ltd. (JETIN IN) fell 11 percent to 197.60 rupees. The largest Indian carrier by market value may shut some ticket-sales and back-end services offices in major cities in India, NDTV Profit reported, without saying where it got the information. The closures may lead to 400 employees losing their jobs, NDTV said.

Oil & Natural Gas Corp. (ONGC IN) declined 4.9 percent to 851.35 rupees. India's largest energy explorer had its stock rating cut to "underperform" from "outperform" at Macquarie Group Ltd., which cited lower forecasts for crude oil prices.

To contact the reporter on this story: Pooja Thakur in Mumbai at pthakur@bloomberg.net .