India’s Sensex Climbs for Second Day on Fed Stimulus Speculation
Tata Consultancy Services Ltd. (TCS), the nation’s largest software services exporter that gets 90 percent of its sales from overseas, surged the most in more than two years. Bajaj Auto Ltd. (BJAUT), the second-largest motorcycle maker, reached its highest level this year. Reliance Industries Ltd. (RIL), owner of the world’s largest refinery complex, advanced 1.1 percent.
The Bombay Stock Exchange Sensitive Index, or Sensex, rose 156.77 points, or 1 percent, to 16,498.47 at the 3:30 p.m. close in Mumbai. The S&P CNX Nifty (NIFTY) Index rose 1 percent to 4,948.90. Its August futures settled at 4,947.40. The BSE 200 Index added 0.9 percent to 2,045.77.
“You have a very clear message from the Federal Reserve, namely they are going to keep the Fed funds rate at zero to 25 basis points for a long period of time,” Robert John Parker, a senior adviser at Credit Suisse Asset Management, said in an interview with Bloomberg UTV today. “I think the message from Bernanke on Friday is that they will continue to provide very high volumes of liquidity to support the money markets.”
The MSCI World Index of global equities rebounded from the lowest level since September before U.S. central bankers meet this week in Jackson Hole, Wyoming. Last year, Fed Chairman Ben S. Bernanke’s hint of a second round of asset purchases spurred a 28 percent jump in the S&P 500.
The Sensex last week had its longest weekly losing run since 2008 on concern the U.S. economy is slowing and Europe’s debt crisis may spread, hurting corporate profits already threatened by rising interest rates.
Tata Consultancy surged 6.9 percent to 981.6 rupees, its biggest rally since July 2009. Nearest rival Infosys Ltd. (INFO) added 3.8 percent to 2,276.95 rupees. The Bombay Stock Exchange IT Index has declined 16 percent this month compared with the 9 percent fall in the Sensex.
“We’re long on information technology worldwide; it’s an interesting buying opportunity,” Credit Suisse’s Parker said. “The sell-off in IT is probably discounting lower levels of growth which we are going to get.”
Bajaj Auto rallied 4.3 percent to 1,544.85 rupees, its best close since December 2010. Bharat Heavy Electricals Ltd. (BHEL), the biggest power-equipment maker, increased 2.6 percent to 1,761.15 rupees. Reliance rose 1.1 percent to 765.25 rupees. Its August futures settled at 765.2 rupees.
India’s central bank has increased its repurchase rate 11 times since the start of last year to damp living costs that are rising the fastest among the so-called BRICS nations. The benchmark wholesale-price inflation in July rose 9.22 percent from a year earlier after a 9.44 percent jump in June.
The Sensex has fallen 22 percent from a Nov. 5 peak, exceeding the 20 percent level that marks a so-called bear market for some investors. Companies on the measure trade at 13.7 times estimated earnings, down from 21.5 times last March. The MSCI Emerging Markets Index trades at 9.8 times.
“The right strategy is to adopt a policy of buying on dips averaging back into markets, including the Indian (SENSEX) market where valuations on a relative basis are now looking more interesting than they have been any time this year,” Credit Suisse’s Parker said. “At least for the next three to six months macroeconomic factors will determine investor mood. As we go into September and early October we will start to see better economic data.”
Earnings for 46 percent of Sensex companies missed analyst estimates in the three months ended June 30, data compiled by Bloomberg show. That compares with 33 percent that trailed forecasts in the previous quarter.
Foreign investors have sold $1.7 billion of equities this month, set for the worst monthly flow since May 2010, as higher borrowing costs weighed on company earnings and the government curbed its decision making amid corruption scandals.
Overseas funds sold a net 12.8 billion rupees ($281 million) of Indian equities on Aug. 18 and Aug. 19, reducing their investment in stocks this year to 25.7 billion rupees, according to data on the website of the market regulator.
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