Reuters
Indian shares rose for a third session yesterday, led by gains in defensive stocks such as ITC on worries the selling spree by foreign investors might continue till year-end, while higher Asian shares underpin the broader market.
Foreign investors sold nearly $1bn worth of shares over nine consecutive sessions of selling, amid a brewing financial crisis in Russia and a crude oil slump, regulatory data show. They still remain net buyers of Indian equities worth $16.5bn in 2014 so far.
Volatility may rise due to expiry of equity derivatives on Wednesday while progress on key reforms such as the opening up of insurance and coal sectors and tabling of a bill on nationwide sales tax in parliament’s winter session that ends Tuesday, are key ahead of the federal budget in February.
Asian shares took their cues from Wall Street and kicked off a holiday-shortened week on a strong footing yesterday. MSCI’s index of Asia-Pacific shares outside Japan extended gains and was up 1.1%. “Value-buying by domestic investors is supporting the market on hopes the insurance bill and GST would go through during the winter session itself,” said Deven Choksey, managing director at K R Choksey Securities.
The NSE index rose 0.22% to 8,242.80, while the benchmark BSE index gained 0.23% to 27,435.13, trading around their respective 50-day moving averages.
ITC rose 1.3%, Hindustan Unilever was up 1.4% while in utilities, NTPC rose 2.4% and Gail India rose 3.2%.
Select lenders such as State Bank of India also gained as Prime Minister Narendra Modi may consider using an executive order to push through laws overhauling the insurance and coal sectors
Meanwhile the rupee gained marginally while bonds were steady yesterday as investors stayed on the sidelines in a holiday-shortened Christmas week likely to see diminishing foreign fund flows.
Foreign funds are usually light on their investments towards the year-end and prefer to start investing fresh funds only at the beginning of the New Year, leading to lower volumes in most markets globally. Both debt and foreign exchange markets saw significantly low volumes in India but sharp gains in the domestic share market helped the rupee edge up.
Traders said the rupee could come under pressure on month-end demand from importers. For bonds, the movement in global crude oil prices will be crucial.
“Some month-end and quarter-end demand should push the rupee down later this week and next,” said Hari Chandramgethen, head of foreign exchange trading at South Indian Bank.
“The rupee’s fall will be limited at around 63.60 levels.” The partially convertible rupee closed at 63.24/25 per dollar, slightly stronger than its Friday close of 63.2950/3050, while the benchmark 10-year bond yield closed steady at 7.96%.
Indian shares rose more than 1% to mark a third consecutive day of gains, while higher Asian shares and hopes of progress on key reforms underpinned the broader market. In the overnight indexed swap market, the benchmark five-year swap rate closed 2 basis points lower at 7.31%, while the one-year rate fell 1 basis point to 7.88%.
Asia markets up in thin trade, tracking Wall Street cues
Asian markets rose in thin trade yesterday ahead of the festive season, tracking cues from Wall Street where stocks surged in a Federal Reserve-fuelled “Santa Claus rally” last week. Stabler oil markets also provided support, with crude prices ticking higher as analysts predicted the sector had bottomed out after plunging almost 50% since June.
Sydney soared 1.94%, or 103.35 points, to 5,442, Seoul gained 0.68%, or 13.14 points, to 1,943.12, Hong Kong climbed 1.26%, 291.94 points to 23,408.57 and Shanghai was up 0.61%, or 18.85 points, to 3,127.45.
Tokyo closed flat, edging up 13.74 points to 17,635.14.
In other markets, Wellington rose 0.25%, or 13.99 points, to 5,541.74; Fletcher Building was up 1.23% at NZ$8.25 and Warehouse Group added 0.98% to NZ$3.08.
Taipei added 1.06%, or 95.48 points, to 9,095.0; Taiwan Semiconductor Manufacturing Co added 0.36% to Tw$138.5 while Hon Hai Precision climbed 2.8% to Tw$88.0.
Manila gained 0.19%, or 13.64 points, to 7,139.27; top-traded Philippine Long Distance Telephone Co rose 0.36% to 2,824 pesos.
Trading is expected to be thin this week at the start of the holiday season, with many traders away for Christmas and New Year celebrations. The gains in Asia come after US stocks went from famine to feast last week, starting out fearful of crashing oil prices and finishing it smiling at a “Santa Claus rally”.
Worries about tumbling oil prices and the crashing Russian rouble, which has lost nearly half its value in 2014 against the dollar, prompted grim sentiment among investors.
But markets began reversing course as the US Federal Reserve left in place market expectations that it may raise interest rates only in the middle of 2015 - and not sooner—and gave a fairly upbeat assessment of the world’s biggest economy.
Following a two-day meeting, Fed Chair Janet Yellen offered reassurances that sharply lower oil prices are a net positive for the economy and that economic fallout from Russia’s struggles is likely to be limited.
US stocks rose for the third day in a row on Friday, with the blue-chip Dow Jones Industrial Average closing up 0.15% at 17,804.80.
The broad-based S&P 500 rose 0.46% to 2,070.65, about five points below its record. The dollar stayed firm after Yellen’s comments.
The greenback was at ¥119.51 in Asian trade, up from ¥119.43 in New York on Friday. While the Fed did not accelerate its timeline for raising interest rates, currency traders are betting the US will increase borrowing costs more quickly than other major central banks, which would tend to boost demand for the dollar.
