India Enters Bull Market as Stimulus Bets Lift Global Equities

  • World markets climb on U.S. jobs data, Abe election victory
  • Sensex rises 20% from February low on monsoon forecast, inflow

Indian equities reentered a bull market, with the benchmark index climbing to a 11-month high, as Asian stocks rose after better-than-expected U.S. jobs data brightened the global economic outlook.

The S&P BSE Sensex jumped 1.8 percent to its highest level since Aug. 19 at the close in Mumbai. The gauge has rebounded 20 percent from a low reached in February, fitting the definition of a bull market, as overseas funds bought shares at the fastest pace in more than a year amid forecasts for above-normal rainfall after back-to-back droughts and a recovery in company earnings.

Indian equities tracked advances in global markets after the S&P 500 Index came near to a record close on Friday following a report that showed U.S. jobs grew the most in eight months in June. The MSCI Asia Pacific Index rose the most in three weeks and Japanese shares rallied the most in four months after Prime Minister Shinzo Abe’s ruling coalition won an election, paving the way for more fiscal stimulus.

“Today’s rally can be attributed to easing in global liquidity,” Lancelot D’Cunha, chief executive officer at Crest Wealth Management Pvt., said by phone from Mumbai. “The June-quarter earnings season is expected to be much better than the last quarter. Also, there are expectations of further reforms by the government in the monsoon session of parliament beginning next week.” He’s advising clients to buy shares of auto and non-banking financial companies.

GST Bill

The government will succeed in passing the Goods and Services Tax Bill in the parliament session due to start July 18, ANI reported Monday citing Transport Minister Nitin Gadkari. The tax is India’s biggest economic reforms in decades. The administration in June eased rules on foreign direct investment, approved a new mining policy and accepted a plan to boost salaries for federal staff. The measures that helped soften the impact of the central bank Governor Raghuram Rajan’s impending departure that was announced days before the U.K.’s referendum to leave the European Union on June 23.

Tata Motors Ltd. was the second-best performer on the Sensex on Monday. The owner of Jaguar Land Rover has rallied 75 percent since gauge entered a bear market on Feb. 11.

ICICI Bank Ltd., the country’s biggest non-state lender, climbed for the first time in four days and Shriram Transport Finance Co Ltd. rallied 5.7 percent to an all-time high. NTPC Ltd., the largest power producer, rallied to a three-month high. Adani Ports & Special Economic Zone Ltd. jumped 4.8 percent.

Earnings Season

Investors are focused on the earnings season, which gets underway Thursday with Tata Consultancy Services Ltd. reporting results for the three months ended June. Infosys Ltd., the nation’s second-biggest software exporter, and Reliance Industries Ltd., owner of the world’s largest refining complex, will report on Friday.

About 66 percent of the companies in the NSE Nifty 50 Index posted March-quarter results that beat or matched estimates, compared with 52 percent in the previous three months. Operating profits climbed about 10 percent, the biggest increase since September 2014, reversing declines in four of the previous five periods, data compiled by Bloomberg show.

An expanding economy, helped by normal monsoon so far this season, and a rebound in global commodity prices will aid the recovery in company profitability, Gautam Sinha Roy, a fund manager at Motilal Oswal Asset Management Co., said in an interview. Metal and energy companies have a combined 10 percent weighting in the Nifty gauge.

The Sensex trades at 16.6 times projected 12-months profits, versus a five-year average of 14.3 and a multiple of 12 for the MSCI Emerging Markets Index, the data show.

“The valuations are not worrying as commodity prices have troughed out and earnings are recovering,” Sinha Roy said.

Foreigners bought $94 million of shares on July 8, taking this year’s inflows to $3 billion. They invested $771 million in June, capping a fourth month of purchases, the longest run of inflows since April 2015, data compiled by Bloomberg show.

Before it's here, it's on the Bloomberg Terminal.