Indian Stocks Climb for 2nd Day as Sugar and Tobacco Shares Gain

  • Risk appetite returns as concern about geopolitical risk fades
  • Sugar companies rally on report government to give subsidy

Indian stocks rose for a second day, helped by fading concern about the fallout from the attacks in Paris, with sugar producers and tobacco companies pacing advances.

Shree Renuka Sugars Ltd. rallied the most in more than seven years, while rival EID Parry India Ltd. surged the most since May 2009 after a report that the government may give subsidy to cane growers. ITC Ltd., the biggest cigarette company, rose the most in five weeks, while Godfrey Phillips India Ltd. rallied to a record. Vedanta Ltd., the largest copper producer, climbed to a one-week high and Tata Steel Ltd. gained for a fourth day.

The S&P BSE Sensex index rose 0.4 percent to 25,864.47 at the close in Mumbai, while a gauge of 500 companies capped its biggest two-day gain in a month. The Sensex climbed Monday after three weeks of declines sent its 14-day relative-strength index to a level that’s considered to be oversold. The gains may recede as investor focus shifts to the possibility of the U.S. Federal Reserve raising interest rates in December, according to Crest Wealth Management Pvt.

“We’ve moved from a bottom to an intermediate uptrend but there’s no immediate trigger to give you the confidence to buy en masse,” Lancelot D’Cunha, chief executive officer at Crest, said by phone from Mumbai. “There will be a decline if the Fed hikes in December.” D’Cunha said he’s advising clients to buy financial services and engineering companies.

Emerging-market stocks recouped from a six-week low, joining a rebound in global markets after the Standard & Poor’s 500 Index gained 1.5 percent on Monday. The U.S. stocks gauge had fallen on seven of the previous eight days after Federal Reserve Chair Janet Yellen said policy makers’ December meeting was a “live possibility” for a rate increase and signs increased that growth overseas was slowing.

Shree Renuka soared 19 percent, the most since July 2008. The stock has more than doubled since Oct. 1. EID Parry soared 9.4 percent, while Bannari Amman Sugars Ltd. jumped 5.8 percent to its highest since Dec. 4.

Vedanta rose the most since Oct. 21, while Hindalco Industries Ltd., an aluminum maker, added 2.3 percent. The stocks were the biggest gainers on the Sensex. Tata Steel rose 1.7 percent. Sun Pharmaceutical Industries Ltd., the most valuable drugmaker, rose 2 percent, the first advance in three days.

Godfrey Phillips soared 11 percent to a record. The stock has almost doubled since Oct. 1. ITC added 3.2 percent, the second-biggest gainer on the Sensex today. VST Industries Ltd. increased 7.6 percent. Golden Tobacco Ltd., which makes Panama brand of cigarettes, soared 20 percent to take its gain since Oct. 1 to 58 percent.

Tobacco Tax

Tobacco companies’ shares rallied amid speculation they will benefit if the government is able to pass the goods-and-services tax bill. Finance minister Arun Jaitley said the government has the votes to win approval for the bill. The tax, one of the nation’s biggest economic reforms in decades, could be rolled out anytime next year after it’s approved, Jaitley said in an interview with Bloomberg TV India. Modi’s opponents have blocked the measure in the upper house of parliament.

“Tobacco companies will be the biggest beneficiaries if the GST bill is passed as there will be clarity on taxes," K. Subramanyam, co-head of equity advisory at Altamount Capital, said in an interview. The GST levy on tobacco “will be lower than current taxes that differ across Indian states."

International investors sold a net $143 million of Indian stocks on Nov. 16, reducing this year’s inflows to $4.1 billion. The Sensex has fallen 6 percent this year and trades at 15.2 times projected 12-month earnings, compared with a multiple of 11 for the MSCI Emerging Markets Index.

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