India’s Sensex Retreats After Biggest Advance in Five Months

  • Fed seen boosting U.S. rates in December, then taking it easy
  • FIIs turn net buyers of local shares first time in five days

Indian stocks fell for a second day this week after the benchmark gauge posted its biggest advance in five months.

Lenders and automakers declined as investors exited recent outperformers, while health-care companies and power utilities saw continued buying interest. The index of small-cap companies climbed to a fresh record.

The S&P BSE Sensex erased an intraday gain of 0.3 percent amid below-average volumes. The measure jumped 1.9 percent on Tuesday, the steepest climb among Asian gauges, as global funds turned net buyers of local shares for the first time in five days and speculation grew that the Federal Reserve will boost interest rates in December then not rush further increases as the U.S. economy remains mixed.

IndexChangeSize and scope
BSE Sensex-0.2%2nd fall this week
NSE Nifty 50-0.2%Changed directions 12 times
S&P BSE MidCap+0.1%Two-week high
S&P BSE SmallCap+0.6%Record high

“After such a big move yesterday, the market is taking a breather,” Rudramurthy B.V., head of research at Vachana Investments Pvt., said by phone from Bengaluru. “The rally was due to short covering and buying from foreign and local institutions. Any decline from current levels is a good opportunity to buy." He is advising investors to buy lenders, automakers and oil companies.

Global funds bought $56 million of local stocks on Tuesday. That followed withdrawals of $374 million in the previous four days, the longest stretch of outflows in more than three weeks. Local institutional investors bought net 1.73 billion of rupees of stocks, extending five days of purchases, data compiled by Bloomberg show.

Investors are also focused on the ongoing earnings season for clues if growth in profitability can justify the high valuations. Infosys Ltd. and Tata Consultancy Services Ltd., India’s top software exporters, last week reported disappointing earnings outlook. Reliance Industries Ltd., owner of the world’s largest refining complex, and Yes Bank Ltd. are scheduled to announced their results on Thursday.

The Sensex trades at 16.4 times projected 12-month earnings, compared with a five-year average of 14.3 times. The MSCI Emerging Markets Index is valued at 12.5 times.

  • Endurance Technologies Ltd. climbed 37 percent in its trading debut.

  • Logistics companies rallied as the government is set to announce the rates for a Goods and Services Tax, or GST. Gati Ltd. capped its biggest two-day jump since June, while Snowman Logistics Ltd. advanced 3.3 percent, extending Tuesday’s 6 percent surge. VRL Logistics Ltd. added 3.1 percent.

  • Cigarette maker ITC Ltd. lost 2.6 percent, the steepest decline in two months, amid reports the GST panel is considering having multiple tax slabs along with a so-called sin tax on demerit goods such as tobacco and luxury products. ITC has the fourth-highest weighting on the Sensex
  • ICICI Bank Ltd. declined 2 percent after rallying 12 percent over the past two days.

  • Fertilizer stocks rallied on expectations that gas pooling will benefit manufacturers and as sentiment for the industry improved before the government’s planned stake sale in National Fertilizers Ltd. Chambal Fertilizers and Chemicals Ltd. surged 9.1 percent, while Gujarat Narmada Valley Fertilizers & Chemicals Ltd. rose 8.8 percent. Deepak Fertilisers & Petrochemicals Corp Ltd. advanced 7.1 percent. Rashtriya Chemicals & Fertilizers Ltd. climbed 6.9 percent. 

  • Wipro Ltd. rose to its highest level since Aug. 25 ahead of its earnings on Friday. 

  • ECE Industries Ltd. soared 13 percent on plans to delist from the exchanges

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