Defensives Send India Stocks to 18-Month High as Software Falls

  • Healthcare, consumer shares among best performers on Sensex
  • Tata Consultancy drags technology companies on weak outlook

Drugmakers and consumer companies advanced, outweighing declines in software makers, as investors sought the safety of defensive shares amid a rally that lifted the benchmark index to an 18-month high.

Sun Pharmaceutical Industries Ltd. climbed the most since May 27, while Aurobindo Pharma Ltd. and Lupin Ltd. rose at least 2.5 percent. A gauge of health-care stocks increased to its highest level this year. Hindustan Unilever Ltd. rallied to the highest price since March 2015, and Maruti Suzuki India Ltd. climbed to a record.

IndexChangeHighest/Lowest Since
S&P BSE Sensex+0.4%March 5, 2015
S&P BSE IT Index-2.5%July 10, 2015
S&P BSE Healthcare +2.2%Jan. 1, 2016 

India’s benchmark indexes are trading near their record highs after rebounding 27 percent from a low in February. The rally has pushed up the Sensex’s valuation to the highest level since January 2011. In comparison, the index of drugmakers has declined this year after a wave of U.S. FDA sanctions in 2015 soured the sentiment for health-care companies.

“Investors are seeking safety in drugmakers as they have not participated in this rally,” Nilesh Dedhia, director at NTD Trading Ltd., said by phone from Mumbai. “Software stocks will continue to drag because of weak earnings visibility. Dedhia said he’s advising clients to book some profits “as valuations have run ahead of fundamentals.”

A gauge of technology stocks slid to the lowest level in 14 months after Tata Consultancy Services Ltd. said that some of its U.S. clients are holding back discretionary spending on applications used in financial services. Shares of Asia’s most valuable software company fell the most since October 2014, and are set for the biggest weekly loss since February.

Rivals Infosys Ltd. and Wipro Ltd. were also among the worst performers on the Sensex.

Slowing industry growth, a transition into digital services and the economic uncertainty around Britain’s decision to depart the European Union have taken the sheen off Indian IT services firms. Mindtree Ltd. Tuesday pared its revenue guidance for the current quarter, citing project cancellations. In July, Infosys slashed its annual sales forecast, sending its shares down by the most in a single day since April 2013.

“Guidance downgrades from software managements will continue to play spoilsport as long as earnings visibility remains low,” Kaushik Dani, a Mumbai-based fund manager at Karvy Stock Broking Ltd., said by phone.

The S&P BSE IT Index has retreated 8.1 percent this year, while the Sensex has rallied 11 percent. The software gauge hasn’t posted an annual loss since 2011.

  • Aurobindo Pharma rose to a four-month high; drugmaker plans to raise $300 million to $400 million and may look selling shares to large investors or private equity funds, ET Now reported in Twitter posts, citing officials it didn’t identify.

  • Yes Bank Ltd. declined for a second day, losing 5.2 percent. The lender deferred a $1 billion share sale to institutional investors, citing volatility in trading, according to a filing released after trading ended. The stock rose to a record on Monday.

  • Foreigners bought $340 million of local equities this week, taking the year’s inflow to $6.4 billion, the most in Asia after Taiwan and South Korea.

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