Indian stocks climbed for a fifth day, led by utilities and automakers, amid optimism about the outlook for company earnings and increases in regional equities.
Coal India (CIL), the world’s top producer, gained the most in three months after raising prices. Hindalco Industries, an aluminium maker, jumped the most in seven years after its profit more than doubled. NTPC, the largest power generator, posted the steepest climb in two months after posting earnings that beat estimates. Tata Motors was the best performer on the S&P BSE Sensex.
The Sensex added 0.27%, or 72 points, to 26,725.60 at the close in Mumbai, extending last week’s 5.3% rally, the steepest since March. A recovery in corporate profits after a drop in four of the last five quarters and forecast for above-average rainfall following back-to-back droughts has boosted confidence in Asia’s fourth-biggest stock market. Overseas funds bought $98mn of domestic stocks on 27 May, taking the month’s inflow to $324mn.
Meanwhile, the 50 shares Nifty rose 0.27%, or 21.85 points, to 8,178.50.
“We’re seeing the green shoots of recovery in corporate earnings,” D.K. Aggarwal, chairman of SMC Investments in New Delhi, said by phone. “Plus, there’s stability on the global front. We have all the positive factors going for us.”
He is advising clients to buy shares of lenders and companies linked to building infrastructure.
Fifteen out of 28, or 54%, of the 30 Sensex companies that have reported March quarter earnings have beaten or matched estimates. That compares with 53% in the three months ended December. Sales have increased 5% year-on-year after five straight quarters of declines, data compiled by Bloomberg show.
Showers in the June-September season starting 1 June are seen at 109% of the mean of about 89 centimetres, Skymet Weather Services, a New Delhi-based private forecaster, said last week. That’s more than the quantum forecast by the state weather office and would be the highest since 1994. CIL surged 4%, the most since February 9. Investors ignored the company’s earnings, which missed analysts’ estimates amid oversupply of the fuel, as the miner raised prices for the first time in three years.
Hindalco jumped the most since May 2009. Net income rose to Rs356 crore in the March quarter from Rs160 crore a year earlier. NTPC climbed 2.5% after its fourth quarter profit of Rs2,720 crore exceeded the estimated Rs2,430 crore.
The rally has pushed up the Sensex’s 14-day relative strength index to 69, near the 70 threshold that some investors see as a signal to sell. The gauge is valued at 16.5 times 12-month projected earnings, compared with its five-year mean of 14, and a multiple of 11.6 for an index of emerging markets.
That’s prompting some investors to say that the gains may have outpaced the outlook for earnings. “Earnings are recovering and some high-frequency data points have turned positive, but the evidence isn’t big and broad enough,” Gautam Chhaochharia, head of research at UBS Securities India in Mumbai, said in an interview. “I’m bullish on India with a three-year perspective” but the market could drop “if the global risk-on trade doesn’t remain as strong as it’s been in the past two months,” he said.
The S&P 500 Index on Friday posted its biggest week since March 4 as data from housing to jobless claims eased concerns that growth is too weak to withstand higher rates. The gain sent the index to a five-week high, erasing losses sparked by increasing anxiety that the Fed stands ready to tighten as soon as June
Meanwhile the rupee yesterday weakened against the US dollar, tracking losses in the Asian currencies markets. Traders are also cautious ahead of an event-heavy week.
The home currency closed at 67.17, down 0.2% from its previous close of 67.04. The rupee opened at 67.23 per US dollar and touched a low of 67.37.
Most Asian currencies closed lower. South Korean won was down 1.05%, Malaysian ringgit 0.94%, Japanese yen 0.71%, Indonesian rupiah 0.39%, Taiwan dollar 0.34%, China renminbi 0.24%, China offshore 0.22%, Philippines peso 0.15%, Thai baht fell 0.1%, Singapore dollar 0.1%.
The government will issue the gross domestic product (GDP) and fiscal deficit data on 31 May after 5.30pm. Gross value added (GVA) would have grown by 7.2% in the March quarter compared with 7.1% in the December quarter, while GDP growth will be at 7.5% from 7.3% a quarter ago, a Bloomberg poll showed.
On Wednesday, India, the US and China will announce manufacturing Purchasing Mangers Index, while on Thursday, the US will announce jobs data and crude oil inventories along with factory orders data.
Traders will be also cautious on a possible June rate hike in the US. The US Federal Open Market Committee’s (FOMC) meet scheduled for June 14-15 will decide whether or not to increase key lending rates.
So far this year, the rupee has weakened 1.55%, while foreign institutional investors (FIIs) have bought $2.03bn from the local equity market and sold $1.16bn in debt markets.
The dollar index, which measures the US currency’s strength against major currencies, was trading at 95.678, up 0.16% from its previous close of 95.521.
Meanwhile, India’s 10-year bond yield closed at 7.461%, as compared with its Friday’s close of 7.471%.
Pedestrians walk past the Bombay Stock Exchange building in Mumbai. The Sensex closed up 0.27% to 26,725.60 points yesterday.
