Most Indian Stocks Rise in Volatile Trade; Banks Climb

  • State-owned lenders rally as govt. announces recapitalization
  • Hindustan Unilever caps biggest two-day drop since June 2015

Most Indian stocks advanced in volatile trading amid investor concern that the recent rally may have outpaced the prospects for earnings growth. State-run banks advanced while consumer companies and automakers declined.

Canara Bank surged to a seven-month high while State Bank of India erased an intra-day loss after the government said it plans to invest 229 billion rupees ($3.4 billion) in banks it owns. Hindustan Unilever Ltd., the biggest home-products maker, fell for a second day after posting profit and revenue that missed estimates. Mahindra & Mahindra Ltd., which makes tractors, and Hero MotoCorp Ltd. were among the worst performers on the S&P BSE Sensex. Wipro Ltd. decreased before its earnings report due after market hours Tuesday.

About two stocks rose for every one that fell on the NSE Nifty 50 Index, which added 0.2 percent. Foreigners have bought $655 million of local shares since July 1, extending four straight months of net purchases that have helped the Sensex rebound 21 percent from a bear-market low reached in February. The rally has pushed up the measure’s valuation to a 16-month high, making it prone to declines if company earnings miss estimates.

“We’ve seen good liquidity and that’s led to last leg of the strong rally we saw,” Ashish Kukreja, chief executive officer at Mumbai-based Craft Financial Advisors Pvt., said by phone. “Valuations are definitely stretched. Markets are looking at the results closely. There will be selling if earnings disappoint.” Kukreja said he has advised clients to buy shares on declines.

Earnings Miss

The Sensex declined Friday and Monday after Infosys Ltd., the second-biggest software maker, and Hindustan Unilever, which sells soaps and toothpastes via two million retail outlets across the nation, reported earnings that disappointed investors.

Hindustan Unilever tumbled 2.9 percent, capping the biggest two-day decline in more than a year. Infosys rose for a second day after tumbling about 9 percent Friday, the steepest decline since April 2013, after paring its annual sales guidance.

Canara Bank jumped 4.9 percent to its highest level since Dec. 3. Indian Overseas Bank added 1.3 percent, while Allahabad Bank rose 1 percent. State Bank of India, the largest, rose 0.4 percent after falling as much as 0.9 percent earlier.

‘Market Comfort’

The lenders are among 13 state-owned banks that will receive a total of $3.4 billion in capital as the government seeks to curb risks in the banking industry while sustaining credit growth. The infusion will boost the government’s shareholdings in the lenders, the finance ministry said in an e-mailed statement on Tuesday.

“This recapitalization will give comfort to the market,” said Nikhil Johri, chief investment officer at Trivantage Capital Management India. The Mumbai-based company has invested in some state-run lenders over the past six months that have shown growth in operating profits, Johri said, without naming them.

HDFC Bank Ltd., the nation’s most valuable private lender, decreased 0.7 percent, while Axis Bank Ltd. slid 1 percent.

(Corrects direction of Mahindra’s move in second paragraph.)
Before it's here, it's on the Bloomberg Terminal. LEARN MORE