India’s benchmark stock index rebounded from the lowest close in four months amid speculation the recent decline was excessive and as investor concern eased that Greece may default on its debt.
Reliance Industries Ltd. (RIL), India’s most valuable company, increased 1.9 percent, halting seven days of losses. Tata Consultancy Services Ltd. (TCS), the largest software exporter, surged most in two months. Housing Development Finance Corp. (HDFC), the biggest mortgage lender, climbed the most in three weeks.
The Bombay Stock Exchange Sensitive Index, or Sensex, rose 53.67, or 0.3 percent, to 17,560.30 at the 3:30 p.m. close in Mumbai. It climbed as much as 1.2 percent earlier. Its 14-day relative strength index, a gauge of how rapidly prices gained or fell during the specified period, reached 28.7 yesterday. A reading below 30 is a signal to buy for some investors.
“We are incrementally turning more and more bullish,” said Sampath Reddy, who manages $6.7 billion as chief investment officer for equities at Bajaj Allianz Life Insurance Co. “Valuations have corrected to attractive levels. We are eagerly looking to invest more money in equity markets in the next couple of months.” Reddy is overweight on shares of drug makers, fast-moving consumer goods and telecom companies.
Asian stocks increased for the first time in five days as concern eased that Greece will default after Luxembourg’s Jean- Claude Juncker, leader of euro-area finance ministers, indicated a solution to the crisis will be found.
The Sensex slumped to a four-month low yesterday after a report the government sought to tax gains on investments routed through Mauritius sparked a selloff. The gauge has declined 14 percent in 2011, the worst performer in Asia. Sensex stocks are valued at 14.3 times estimated earnings, compared with 10.8 for the MSCI Emerging Markets Index.
The S&P CNX Nifty Index on the National Stock Exchange rose 0.3 percent to 5,275.85 and its June futures settled at 5,276.10. The BSE 200 Index increased 0.1 percent to 2,182.50.
About sixty-four percent of local brokers expect the Nifty to drop as much as 5 percent and trade in the range of 5,000 to 5,200, according to a survey of 20 brokerages by Bloomberg UTV. The brokers are bullish on shares of telecom and consumer goods companies. They are negative on shares of automakers, software, cement, metals, infrastructure and state-run lenders.
“Markets could be very volatile in the short term, given the kind of headwinds we’re facing, whether it’s the Greece concern or the interest rate hikes that have been happening,” Bajaj’s Reddy said. “The headwinds will probably be over in a couple of months or so.”
Reliance, TCS Recover
Reliance Industries, owner of the world’s largest refining complex, advanced 1.9 percent to 848.65 rupees, its steepest climb in two weeks. Yesterday, the stock fell to its lowest level since April 2009. Tata Consultancy Services jumped 3.5 percent to 1,106.75 rupees, reversing four days of slide. Housing Development Finance increased 2.1 percent to 643.05 rupees and its June futures settled at 633 rupees.
The central bank raised the repurchase rate to 7.5 percent from 7.25 percent on June 16, extending the longest streak of tightening in a decade, joining its peers from China to South Korea in stepping up the fight against surging living costs.
Rising borrowing costs have begun to crimp demand. India’s $1.4 trillion economy expanded 7.8 percent in the three months through March 31, the slowest pace in five quarters.
Overseas investors sold a net 3.63 billion rupees ($80.8 million) of Indian stocks on June 17, taking total withdrawals this year to 11.7 billion rupees, according to data on the website of the Securities and Exchange Board of India.
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