Indian stocks gained for the second day after some investors judged recent declines excessive and overseas investors added to their holdings.
The BSE India Sensitive Index, or Sensex, rose 0.2 percent to 19,608.08 at the close. Tata Motors Ltd. climbed for a third day after sales of Jaguar Land Rover rose 32 percent. Housing Development Finance Corp., the biggest mortgage lender, gained the most in a week.
The Sensex advanced yesterday, ending the longest losing run in 15 months that pushed down the 30-stock gauge’s 14-day relative strength index to 37 on Feb. 11. A reading of below 30 is a signal to buy for some investors. Foreigners bought a net $7.6 billion of domestic shares so far this year, a record for the period, data compiled by Bloomberg show.
“Investors are bullish while traders are bearish and the market will ultimately respond to investors belief rather than traders’ call for a decline,” Siddarth Bhamre, an analyst with Angel Broking Ltd., said by phone from Mumbai. “Consistent buying by overseas investors is lifting sentiments. We expect stocks to edge higher from here.”
Tata Motors, the best performing stock on the Sensex last year, increased 2.1 percent to 304.7 rupees. Land Rover sales rose 31 percent to 29,118 vehicles in January, and Jaguar’s climbed 40 percent to 5,759 vehicles, the company said today.
Mahindra & Mahindra Ltd., the nation’s largest maker of sport-utility vehicles and tractors, gained 1.4 percent to 897 rupees. Housing Development Finance added 1.8 percent to 815 rupees. Tata Consultancy Services Ltd., India’s top software exporter, rose 1.8 percent to 1,435.4 rupees, and its nearest rival Infosys Ltd. climbed 1.2 percent to 2,789.55 rupees.
Volumes on the Sensex were 6 percent less than the 30-day average at the close. The CNX Nifty Index on the National Stock Exchange of India added 0.2 percent to 5,932.95.
Overseas funds bought $3.5 billion of local stocks this month, the highest among 10 Asian markets tracked by Bloomberg. They bought $24.5 billion in 2012, helping the Sensex to its biggest annual advance in three years. Global equity funds drew $18.8 billion, six times the money that went into bonds in the week ended Jan. 30, Citigroup Inc. said in a Feb. 1 report, citing EPFR Global data.
“There is a big trade globally of money moving from bonds to equities, and India is part of that trade,” Sankaran Naren, chief investment officer for equities at ICICI Prudential Asset Management Co., the nation’s third-largest money manager, told Bloomberg TV India today. Foreign funds prefer India as it’s a “potential high-growth country,” he said.
The Sensex trades at 13.5 times estimated earnings for the year ending on March 31, 2014, compared with the MSCI Emerging Markets Index’s 8.7 times. Ten out of 25, or 40 percent, of Sensex firms that have reported December-quarter earnings have missed estimates, the same as in the previous two quarters.
The government will release the January inflation data tomorrow that may show wholesale-price growth dropped below 7 percent for the first time since November 2009, according to the median estimate in a Bloomberg survey. That may widen the central bank’s scope to lower interest rates and help Finance Minister Palaniappan Chidambaram deepen spending curbs to ease price pressures amid wider government efforts to encourage a revival in investment.
Inflation, based on wholesale prices, probably decelerated to 6.98 percent in January, from a three-year low of 7.18 percent in December, according to the survey. Consumer prices advanced 10.79 percent in January from a year earlier, a report showed yesterday. That’s the fastest in the BRIC group, which also includes Brazil, Russia and China.