Indian Stocks Rebound From 3-Month Low as Declines Seen Overdone

  • Sensex's 14-day RSI drops below 30, signaling recovery
  • Uncertainty over GST, Fed rate liftoff weighs on stocks

Indian stocks rose for the first time in seven days as some investors judged the recent decline in the benchmark index to a three-month low as excessive. 

Reliance Industries Ltd., owner of the world’s largest refining complex, had the steepest gain in about three months. GAIL India Ltd., the nation’s biggest gas-marketing company, climbed the most in two weeks. Hindalco Industries Ltd., an biggest aluminum producer, rose for the first time in three days. Shipping Corp. of India soared to a four-year high after the government proposed measures to boost the local shipbuilding industry.

The S&P BSE Sensex surged 0.9 percent to 25,252.32 at the close in Mumbai. The gauge slid for a sixth day Wednesday, sending its 14-day relative-strength index below the threshold of 30, which some investors see as a signal to buy. Prospects of higher U.S. interest rates and concern over the passage in parliament of the goods-and-services tax bill, the centerpiece of Prime Minister Narendra Modi’s reform push, have weighed on stocks this week.

“The market is a bit oversold and we’re seeing some value-buying,” Alex Mathews, the head of research at Geojit BNP Paribas Financial Services Ltd., said by phone from the southern state of Kerala. “The overall trend remains negative, given the uncertainty about the GST bill and the impending Fed rate liftoff next week." Mathews said he’s advising investors buy logistics and consumers goods companies for the longer term.

The rupee strengthened for the first time in seven days after the central bank indicated it may take additional steps to stem the currency’s losses. The currency lost 0.5 percent in the past six days.

Parliament Disruption

Reliance jumped 3.8 percent, ending a five-day decline. GAIL India increased 2 percent. Hindalco surged 2.6 percent, ending a two-day, 6.9 percent retreat.

Shipping Corp surged 7.4 percent to its highest level since August 2011. ABG Shipyard Ltd. soared 8.6 percent, the most since July 23. Great Eastern Shipping Co. added 1.4 percent.

The parliament has been disrupted this week after the main opposition Congress party protested a court order for its leaders Sonia Gandhi and her son Rahul to testify in a corruption case filed by a member of the ruling Bharatiya Janata Party. The roadblock risks further delays to the tax bill.

International investors sold a net $68 million of local stocks on Dec. 9, reducing this year’s inflows to $2.7 billion. They’ve sold $1.1 billion of local stocks in November. The Sensex has decreased 8.2 percent this year and trades at 14.9 times projected 12-month earnings. The MSCI Emerging Markets Index is valued at a multiple of 10.9.

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