Indian small and medium-cap shares rallied to a record on optimism falling commodity prices will help cut input costs, even as the benchmark stock index ended four days of gains after the central bank maintained interest rates.
Pidilite Industries Ltd., the largest adhesives maker, jumped the most in five years. Torrent Power Ltd. increased the most since Dec. 18 and Nitin Fire Protection Industries Ltd. soared 20 percent. Motherson Sumi Systems Ltd., the biggest auto parts maker, climbed to an all-time high.
The S&P BSE MidCap and SmallCap gauges closed at all-time highs. The S&P BSE Sensex lost 0.4 percent to 28,071.93, led by energy companies and industrials. Brent oil fell below $50 for the first time since January as expanding supplies and signs of slower economic growth in China fueled a rout in commodities from gold to copper. The midcap index has risen six times the Sensex’s 2 percent gain this year.
“Companies that use oil derivatives as raw materials, such as makers of paints, tires and lubricants, are benefiting significantly, and they are not part of the Sensex,” Sadanand Shetty, a senior fund manager at Taurus Asset Management Co., which has $650 million, said by phone from Mumbai. “The real action is in the mid and small-cap companies.” He’s bullish on oil-refining, railways and logistics companies.
Reserve Bank of India Governor Raghuram Rajan left the main interest rate at 7.25 percent after three cuts this year. The move was forecast by 39 of 42 economists in a Bloomberg survey, while three expected a reduction to 7 percent. Rajan wants to ensure his inflation target of 6 percent by January isn’t at risk from surging food prices, a poor monsoon and a possible increase in U.S. interest rates next month.
“Monetary policy has stopped dictating market trends,” said Shetty. “There were no major expectation of a rate cut in any case.” His Taurus Discovery Fund has returned 15 percent this year, beating 90 percent of its peers, according to data compiled by Bloomberg.
International investors bought a net $67 million of local stocks on Monday, taking this year’s inflows to $7.2 billion.
The Sensex has gained 2.1 percent this year and trades at 15.7 times its projected 12-month earnings. The MSCI Emerging Markets Index is valued at a multiple of 11.2.