India’s SmallCaps Climb to Record as Nifty Rises Before Expiry

  • Nifty futures roll costs increases as traders raise hedges
  • Foreigners turn sellers of local shares first time in 30 days

India’s mid- and small-cap stocks reclaimed an all-time high and the benchmark gauges eked out gains in volatile trading before the expiry of the derivatives contracts Thursday.

Aurobindo Pharma Ltd. jumped the most in 18 months month after reporting a 24 percent jump in first-quarter profit. Its rivals, Torrent Pharmaceuticals Ltd., Divi’s Laboratories Ltd. and Wockhardt Ltd. were the among the best performers on an index of 82 medium-sized companies. Maruti Suzuki India Ltd. rallied the most in three weeks after CLSA Asia-Pacific Markets raised it to buy from outperform.

Index Change Size and scope
Sensex+0.3%Most since Aug. 18
Nifty +0.2%Second day of gain
S&P BSE MidCap+0.6%Ending two days of fall
S&P BSE SmallCap+0.7%Record

An index of 759 small-sized companies has risen 6 percent this year to a record, while the mid-cap gauge has rallied 17 percent in the period as investors look for companies whose earnings are tied to the domestic economy. The S&P BSE Sensex and the NSE Nifty 50 Index have risen 7.4 percent and 8.9 percent each, rebounding from their lows in February, as capital flows to India accelerated amid a wave of global policy easing.

Foreign funds have bought a net $5.8 billion of local shares this year, the most in Asia after Taiwan and South Korea. 

“Higher demand and less supply is driving mid- and small-cap stocks as traders see a short-term business opportunity in these counters,” Deven Choskey, managing director at Mumbai-based K.R. Choksey Shares & Securities, said by phone. An increase in roll costs also signals a bullish undertone, he said.

The roll cost, or the price traders are paying to replace August futures with September securities, was 66 basis points at 4:21 p.m. in Mumbai, versus a six-month average of 60 basis points a day before expiry, data compiled by Bloomberg show.

Still, the Nifty has swung 1 percent or more only twice this month as traders look for clues on how aggressive the U.S. Federal Reserve will be in raising interest rates, something Fed Chair Janet Yellen may touch on when she speaks later this week at a gathering of central bankers in Jackson Hole, Wyoming. At least three Fed officials have made hawkish remarks since the start of last week, though U.S. economic data remains mixed.

Idea Cellular Ltd. declined the most in two weeks after it denied a report that the company is exploring a merger plan with Vodafone India.

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