Sensex Rises From 20-Month Low as Reliance Jumps Before Earnings

  • 14-day RSI signals Sensex oversold after recent selloff
  • Sensex down 17.5% from 2015 peak, near bear-market territory

Indian stocks rebounded from a 20-month low as some investors judged the recent slide that sent the benchmark index to the brink of a bear market on Monday to be excessive.

Reliance Industries Ltd., the owner of the world’s largest refining complex, jumped 2.6 percent before its quarterly earnings report. ICICI Bank Ltd. and Axis Bank Ltd., the top private lenders, were among the best performers on the S&P BSE Sensex. Adani Ports & Special Economic Zone Ltd. surged the most in five months. Larsen & Toubro Ltd. rallied from near a two-year low.

The Sensex surged 1.2 percent to 24,479.84 at the close in Mumbai. The worst start of a year since 2011 has pulled the gauge’s valuation to the cheapest level in four months amid concern about China’s market turmoil and the rout in commodities. The index’s 14-day relative strength index dropped to 28 on Monday, below the level of 30 that some analysts say signals a rebound is imminent.

“It’s a relief rally from oversold levels," Kaushik Dani, a fund manager at Karvy Stock Broking Ltd., said from Mumbai by phone. “It’s difficult to be gung-ho on the market as global growth and uncertainty are still big concerns. It’s best to have a stock-specific approach depending on how earnings play out." He favors shares of private-sector banks and software exporters.

Capital Outflows

The Sensex trades at 14.7 times its projected 12-month profits, compared with a multiple of 10.4 for the MSCI Emerging Markets Index. The Indian gauge came within 1.5 percent of the 20 percent threshold of a bear market on Monday.

Overseas funds sold a net $276 million of Indian shares on Monday, taking this year’s outflow to $1.1 billion. They invested $3.3 billion in 2015, the smallest inflow since 2011, as news out of China combined with the cooling in optimism surrounding Prime Minister Narendra Modi’s economic agenda.

Reliance Industries may say third-quarter profit rose 38 percent to 70.1 billion rupees, according to the median estimate of 16 analysts in a Bloomberg survey.

So far, two of the three Sensex companies that have reported earnings for the December quarter have beaten estimates. Fifty-seven percent of Sensex companies in the September quarter posted earnings that matched or beat estimates, versus 60 percent in June, data compiled by Bloomberg show.

ICICI Bank jumped 2.5 percent, the most since Dec. 21. Axis Bank rallied 5.3 percent, the most since Sept. 8.

Adani Ports soared 6.2 percent, the most since Aug. 14 and is the best performer on the Sensex today. Larsen & Toubro surged 3.6 percent, the most since Oct. 5. Tata Motors Ltd., the owner of Jaguar Land Rover, climbed 4.1 percent.

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