Indian Stock Futures Gain as Valuations Drop; ITC Jumps
Indian stocks climbed amid speculation the biggest loss in two weeks undervalued earnings prospects, and after emerging-market nations pledged to support the International Monetary Fund.
The BSE India Sensitive Index (SENSEX), or Sensex, rose 0.9 percent to 16,859.80 at the 3:30 p.m. close in Mumbai. The gauge slid 1.4 percent yesterday, the most since June 1. ITC Ltd. (ITC) led gains among consumer-staples companies, rising to a record on speculation earnings will be sheltered from slowing economic growth. Reliance Industries Ltd. (RIL), owner of the world’s largest refining complex, surged the most since March 30.
The Sensex’s valuation sank yesterday to 13 times estimated profit after the central bank unexpectedly refrained from cutting interest rates as the impact of Europe’s debt crisis fans through Asia and dominates the agenda of a Group of 20 summit in Mexico. India and China pledged to contribute to the IMF to help protect the world economy from the crisis.
“Valuations are definitely attractive for someone looking at the longer term,” said Kishor Ostwal, managing director of CNI Research (India) Ltd., a publicly-traded equities research provider in Mumbai. “In the short term, we will see this volatility due to global and domestic macroeconomic concerns. Stimulus from emerging and developed nations will give a temporary respite to investors. Investors are cautious and they prefer the safety of defensive stocks like consumers and drugmakers.”
The Sensex’s valuation sank to a three-year low of 12.4 times estimated earnings on May 23. The gauge has fallen 8.5 percent from this year’s high on Feb. 21 on concern slowing economic growth will hurt corporate profits. Prime Minister Manmohan Singh is grappling with an economy hobbled by a record trade deficit, a budget shortfall that has exceeded targets, corruption scandals and coalition infighting that has stymied his efforts to lure more foreign investment.
Emerging countries boosted their pledges to the IMF’s global firewall, nearly doubling the fund’s resources to $456 billion, at a G-20 summit in Mexico dominated by the global effort to restore confidence in the euro.
China, Brazil, Mexico, India and Russia announced contributions to the IMF to bolster a “second line of defense,” fund Managing Director Christine Lagarde said in an e-mailed statement. China will contribute $43 billion, the official Xinhua News Agency reported. The other countries pledged $10 billion each.
The S&P CNX Nifty (NIFTY) Index on the National Stock Exchange added 0.8 percent to 5,103.85 and its June futures settled 1.1 percent higher at 5,114.30. India VIX, which measures the cost of protection against losses in the Nifty, plunged 5.2 percent to 21.43. The BSE-200 Index (BSE200) increased 0.8 percent to 2,059.92. Combined trading volume on India’s top two exchanges was 768 million shares yesterday, 15 percent less than the 12-month daily average of 907 million.
ITC jumped 2.6 percent to 249.40 rupees, a record close. Oil & Natural Gas Corp. (ONGC), the largest state-owned oil explorer, rose 1.7 percent to 267.60 rupees, ending three days of losses.
Reliance rallied 2.6 percent to 737.45 rupees. Sun Pharmaceutical Industries Ltd. (SUNP), the most valuable drugmaker, gained 1 percent to 598.05 rupees. Cipla Ltd. advanced 1.5 percent to 309.95 rupees.
Overseas investors bought a net $70 million of Indian stocks on June 15, raising their investment this year to $8.64 billion, according to the nation’s market regulator. They cut holdings by $273 million in May, a second consecutive month of net sales.
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