Investors Bet on Earnings, Growth as Indian Stocks Hit New Highs

  • Sun Pharmaceutical rises most on Sensex on new-drug approval
  • GST, demonetization ‘behind us,’ Centrum’s Shelatkar says

Komileva Says Markets in State of 'Rational Exuberance'

India’s main equity indexes extended gains to new record highs as some investors bet on the continued recovery of company profits and the nation’s economic growth on the impact of Prime Minister Narendra Modi’s reforms that included a currency ban last November and a new nationwide goods and services tax in July.

The benchmark S&P BSE Sensex advanced 0.2 percent to 34,071,11 at 11:39 a.m. in Mumbai, a new all-time high. The NSE Nifty 50 Index gained 0.1 percent. Sun Pharmaceutical Industries Ltd., the country’s biggest drugmaker, rose the most among Sensex and Nifty companies. It climbed as much as 6.4 percent after saying the U.S. FDA approved its new drug for a dry eye disease.

India’s economy bounced back from a three-year low, rising 6.3 percent in July to September, and earnings of the 50 Nifty companies rose more than 14 percent from a year earlier, the first double-digit growth in 13 quarters. They are estimated to rise 13 percent in the October to December period, according to data compiled by Bloomberg.

For some investors, these are indicators of a recovery in consumer demand and businesses of mid- and small-sized companies that were disrupted after the nation scrapped 86 percent of its banknotes in November 2016 and introduced a new consumption tax in July.

“GST and demonetization is behind us and now we will see successive quarters of growth in earnings and the economy,” Purvesh Shelatkar, senior vice president of institutional sales at Mumbai-based Centrum Broking Ltd., said by phone. “Huge domestic liquidity will drive things in a big way and we are heading for 13,000 on the Nifty,” he said.

Liquidity Driven

India equity funds have seen record inflows this FY

Source: Association of Mutual Funds in India

The nation’s equity funds received a record 1.2 trillion rupees (nearly $19 billion) of inflows in the first eight months of the fiscal year that began April, according to the latest data released by the Association of Mutual Funds in India. The Sensex and Nifty have returned nearly 36 percent this year in U.S. dollar terms, among the best performers in Asia.

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