India's Mid-Cap Stocks Climb as Sensex Swings in Volatile Trade

  • Focus shifts to earnings season as investors await recovery
  • Sudarshan Chemicals sparks rally among dyes producers

India’s mid- and small-cap stocks advanced, helped by chemicals producers and metal makers, even as the benchmark index closed little changed in volatile trading.

Sudarshan Chemical Industries Ltd., a producer of color pigments, surged the most in a year, while A2Z Infra Engineering Ltd. soared by the 20 percent limit. Tata Steel Ltd., the top producer of the alloy, rallied to a 10-month high. Hindalco Industries Ltd., the nation’s second-biggest aluminum maker, extended last month’s 28 percent rally.

The S&P BSE SmallCap Index climbed 0.9 percent, while the benchmark S&P BSE Sensex rose less than 0.1 percent after changing direction at least 20 times. Investor attention shifted back to company earnings after the market discounted the Reserve Bank of India’s interest-rate cut that was widely predicted.

“Investor interest shifted to small- and mid-caps after last month’s rally in the large companies,” Paras Bothra, a Mumbai-based vice president of equity research at Ashika Stock Broking Ltd., said by phone. “The RBI event is over. Investors will keenly watch the earnings season to see if profit growth recovers or gets delayed further."

The Sensex last month capped its best month since January 2012 as a government pledge to further pare the fiscal gap and speculation of an interest-rate reduction spurred capital inflows. Company profits remain on the opposite trajectory, falling in four of the last five quarters in the worst run since the financial crisis.

Sudarshan Chemical surged 19 percent to its highest level since Jan. 1. Bodal Chemicals Ltd., a maker of dyes, climbed to a record. The company has gained 42 percent in the past month. Rival Kiri Industries Ltd. extended a five-day surge that’s doubled its share price. Thirumalai Chemicals Ltd. rallied to a three-month high.

“There have been reports that China is shutting some chemical factories because of high pollution levels, and investors are betting that Indian companies will benefit from that,” Ashika’s Bothra said. “That’s why we’re seeing a rally in chemical companies.”

Tata Steel soared 5.2 percent, the best performer on the Sensex. The shares have rallied 26 percent this year. Hindalco climbed 4.8 percent, the most since March 23. Tata Motors extended last month’s 29 percent climb.

The Sensex has fallen 4.7 percent this year and trades at 15.2 times 12-month projected profits versus 11.5 for the MSCI Emerging Markets Index. Foreigners sold $140 million of local stocks on April 5, the first outflow since March 15.

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