Indian Stocks Close at 11-Month High in Volatile Trading

  • Sensex’s 14-day RSI at 70, signaling market may be overbought
  • Gauge has risen 21% from February low, entering bull market

Indian stocks swung between gains and losses after the benchmark gauge advanced to an 11-month high. Energy companies and metal producers climbed while industrials declined.

Oil & Natural Gas Corp. climbed to a six-month high as the government is said to have allowed refiners to increase kerosene prices every month, a move that would ease the subsidy burden borne by the largest explorer. A gauge of energy companies climbed to a 11-month high. Tata Steel Ltd. was the best performer on the S&P BSE Sensex. Larsen & Toubro Ltd. and Maruti Suzuki India Ltd. dropped more than 1 percent each.

The Sensex closed little changed after changing direction at least 15 times. The gauge has risen 21 percent from a low in February, fitting the definition of a bull market, helped by forecasts for above-normal rain after back-to-back droughts and a recovery in company earnings. The index’s relative strength index has risen to 70, a level some investors see as a signal to sell, and its valuation is the most expensive in five years.

“We see some consolidation and profit-booking happening at current levels as the rally has been quick,” D. K. Aggarwal, chairman of SMC Investments Pvt. in New Delhi, said by phone. “Investors are focusing on the next session of parliament and the results season. Those events will set the market’s tone in the near term."

Reporting Season

The earnings season gets underway Thursday with Tata Consultancy Services Ltd., the largest software exporter, reporting results for the three months ended June. Infosys Ltd., the second-biggest, 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.

Foreign funds bought $217 million of shares since July 1, extending a four-month stretch of net inflows that was the longest in more than a year. They have plowed more than $2 billion into equities in India, Indonesia, South Korea, Philippines, Thailand and Taiwan this week as the U.K.’s vote to leave the European Union has bolstered prospects for stimulus in major economies, boosting demand for riskier assets.

The Sensex trades at 16.6 times projected 12-months profits, versus a five-year average of 14.3. The MSCI Emerging Markets Index trades at 12.2 times.

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