India’s Sensex Snaps Two-Day Loss as Capital Goods Shares Climb

Indian equities climbed, led by capital goods companies, with the benchmark index ending a two-day decline amid expiry of derivatives contracts.

Engineering company Larsen & Toubro Ltd. rose 1.6 percent, sending a measure of 20 machinery and equipment producers to a six-month high. Tractor maker Mahindra & Mahindra Ltd. rose to its highest price in five months. Reliance Industries Ltd., the owner of the world’s largest refining complex, climbed the most in 10 days. Hindustan Unilever Ltd. added 1 percent.

The S&P BSE Sensex added 0.6 percent to 20,534.91 at the close. The gauge touched the day’s low of 20,461.51 toward the end of the session before recovering amid expiry of the monthly futures and options contracts. Foreign funds have bought a net $977 million of stocks this month, heading for a third straight monthly inflow. They have bought $17.3 billion of shares this year, the highest inflow in Asia after Japan.

“There’s expectation that capital goods companies will have better order books in the second half of the fiscal year as some stalled projects are getting started,” Deven Choksey, managing director at K.R. Choksey Shares & Securities Pvt. in Mumbai, said by phone. “Most long positions in capital goods, utilities and metals got rolled over to the next series.”

Rollovers in the 50-stock CNX Nifty futures for November delivery were at 73 percent at 4:36 p.m. in Mumbai, compared with 63 percent average of the previous three series, according to data compiled by Bloomberg. Derivatives contracts in India expire on the last day of the month.

Larsen climbed to a six-month high, taking this month’s gain to 5 percent. The stock rose 23 percent in October. Bharat Heavy Electricals Ltd. surged to its highest level since July 31, paring its year-to-date drop to 34 percent. The S&P BSE India Capital Goods Index climbed to its highest since May 28.

‘Cyclical Recovery’

Birla Sun Life Asset Management Co., India’s fourth-biggest money manager with $12 billion in assets, is buying shares of capital goods companies amid expectation that their earnings will improve as economic growth revives, co-chief investment officer Mahesh Patil said in an interview yesterday.

“We have touched the bottom as far as economic growth is concerned,” he said. “We will see a cyclical recovery.”

Still, data due tomorrow may show India’s economy grew 4.6 percent from a year ago in the quarter ended Sept. 30, compared with 4.4 percent in the previous three months, according to a Bloomberg survey of 40 analysts. That would cap the longest quarterly stretch of sub-5 percent growth since 2005.

Mahindra rallied 1.8 percent to its highest level since July 5. Reliance advanced 1.2 percent to 847.95 rupees. Tata Steel Ltd. added 1.6 percent.

The Sensex has risen 5.7 percent this year and is valued at 13.4 times projected 12-month earnings, compared with the MSCI Emerging Markets Index’s 10.6 times. The Indian gauge has lost 3 percent this month, set for the first monthly loss since August.

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