India MidCaps Rebound as Sensex Completes Second Quarterly Gain

  • Small, mid-cap indexes climb after biggest drop in 13 months
  • Foreigners buy $4.1b in current quarter, most since March 2015

Indian small- and mid-cap stocks rebounded even as their bigger counterparts were volatile after falling the most in three months following the nation’s attack on terrorists in Pakistan.

The S&P BSE MidCap Index jumped the most in seven months as some investors judged the gauge’s 3.6 percent tumble on Thursday was overdone. The S&P BSE Sensex and the NSE 50 Nifty Index, India’s benchmark indexes, closed little changed amid volumes that were five percent below the 30-day mean. The Sensex slid the most since June 24 on Thursday.

BSE Sensex+0.1%27,865.96
Nifty 50+0.2%8,611.15
S&P BSE MidCap+2%13,166.68
India VIX-6.9%17.18

“The mood is still cautious and the only hope is that the tensions don’t escalate,” said Aneesh Srivastava, who manages $700 million as chief investment officer at IDBI Federal Life Insurance Co. in Mumbai. “The economic consequences for us could be far greater if Pakistan retaliates.”

The conflict in Pakistan and increased global volatility have introduced a sobering note for the Indian markets closing out a blockbuster quarter. The Sensex capped a second quarterly advance with a 3.2 percent gain in the three months ending Friday and the rupee is poised to end a five-quarter losing run. Benchmark 10-year bond yields have plunged 63 basis points, the most since the three months ended December 2014.

Local assets have rallied as foreigners bought the most stocks and bonds in the September quarter since the similar period ended March 2015, as the government took steps to boost economic growth. Speculation that slowing inflation will allow new Reserve Bank of India Governor Urjit Patel to cut interest rates at next week’s policy review have added to the optimism. IDBI Federal expects borrowing costs to fall 25 basis points by the year-end, Srivastava said.

Global investors bought 34.1 billion rupees of shares and their domestic counterparts were net buyers of 16.3 billion rupees of equities on Thursday, provisional data from the nation’s exchanges show. State-run banks bought a record amount of sovereign bonds on Thursday, taking advantage of the biggest yield jump in 13 months after the country’s army said it attacked terrorist camps in Pakistan.

  • Maruti Suzuki India Ltd., the nation’s largest carmaker, is the top-performing Sensex stock in the September quarter with a 31 percent rally. Bharti Airtel Ltd. and Wipro Ltd. were the biggest decliners.

  • Alkem Laboratories Ltd. tumbled as much as 8.3 percent. The pharmaceutical company said it received an inspection report from the U.S. Food and Drug Administration that highlighted several shortcomings that had to be addressed at its factory.

  • Cipla Ltd. was the biggest decliner on the Sensex. The drugmaker said observations from the U.S. FDA at its facilities in Goa were procedural, and that it has responded to them. The stock tumbled as much as 6.5 percent before paring losses to 3.4 percent.

  • Gammon India Ltd. rose 4.6 percent, ending a five-day, 14 percent slide after bagging a 16.3 billion rupees ($245 million) highway contract.

  • Liquor stocks rallied after Press Trust of India reported that the Patna High Court on Friday quashed liquor prohibition act implemented in Bihar state. Radico Khaitan Ltd. jumped 6.7 percent, the most since Aug. 30. United Spirits Ltd. rallied 7 percent, the steepest climb since May 2015. Tilaknagar Industries Ltd. jumped 7.9 percent.
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