Indian Stocks Climb for Second Day as Metals Gain on Global Cues

  • Lupin, Asian Paints top Sensex stocks as Mahindra declines
  • Global metal prices at highest in a year on demand outlook

Indian stocks climbed for a second day, led by metal producers and industrials, as gains in Asian and U.S. equities spurred traders to close bearish bets before the expiry of monthly derivatives contracts on Thursday.

The MSCI Asia Pacific Excluding Japan Index gained for a third day, led by raw-material producers, as the Dow Jones Industries Average topped 19,000 for the first time Tuesday. The benchmark S&P BSE Sensex reclaimed the 26,000 level after breaking below it earlier this week for the first time since May.

IndexChangeSize and Scope
BSE Sensex+0.4%Second day of gains
NSE Nifty 50+0.4%Stays above 8,000 for second day
BSE Metal+2.3%Highest level since Nov. 15

Indian equities have sold off this month, with the Sensex poised for its worst month since February, as concern mounts that the government’s recall of 15 trillion rupees of currency notes -- or 86 percent of total bills in circulation -- will hurt economic growth. The cash crunch may pull down gross domestic product in the year through March by 0.5 percentage points, Citigroup Inc. said in a report on the weekend. Credit Suisse Group SA and Deutsche Bank AG have forecast a 1 percentage point contraction in GDP growth for the fiscal year.

“There could be a relief rally or short covering but I don’t foresee a runaway market as there’s no growth visibility in the immediate future,” said A. K. Prabhakar, head of research at IDBI Capital Market Services Ltd. in Mumbai. “Every segment of the economy is impacted by the demonetization move as customers are delaying purchases. There is uncertainty about when consumption will return to normal.”

Outflows

The rollover rate in November futures linked to NSE Nifty 50 Index was at 44 percent at 4:50 p.m. in Mumbai versus a six-month mean of 54 percent one day before expiry, according to data compiled by Bloomberg. In India, derivatives contracts expire on the last Thursday of the month.

Capital outflows from emerging markets after Donald Trump’s shock victory are adding to the pressure on Indian equities. Global funds have withdrawn $1.7 billion from local shares this month, the highest in Asia after Taiwan, data compiled by Bloomberg show. Domestic funds, in comparison, have bought $1.8 billion of shares, the data show.

The selloff has dragged the Sensex’s valuation to 15.4 times projected 12-month earnings, near the cheapest level since May. That compares with the MSCI Emerging Markets Index’s multiple of 12.

  • Reliance Capital rose 4.4 percent after it said Reliance Broadcast signed an agreement with Zee Media to sell 49 percent in radio broadcast business 92.7 BigFM.
  • Siemens India dropped 1.8 percent after fourth-quarter profit missed estimates and the company transferred the healthcare business to parent unit.
  • Drugmaker Lupin Ltd. advanced 5 percent after its generic drug to treat HIV infection received tentative approval from U.S. Food and Drug Administration.
  • Larsen & Toubro Ltd. posted the steepest climb in five months after its earnings beat estimates and the engineering company maintained its revenue guidance.
  • Hindalco Industries Ltd. jumped to a two-week high as industrial metals traded near a one-year high amid optimism that a recovery in global demand is underway.
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