Indian stocks reversed gains, with benchmark gauges falling to one-month lows, as lenders and industrials fell before the expiry of monthly derivatives contracts and as global equities erased an earlier advance.
The S&P BSE Sensex and the NSE Nifty 50 gave up intraday gains of 0.5% in the last hour of trade when European markets opened. The MSCI All-Country World Index erased a rally fuelled by Hillary Clinton’s performance in the first American presidential debate, weighed down by the prospect of US fines for Volkswagen and Deutsche Bank.
“Foreign investors are turning cautious as European banks and US elections keep markets on tenterhooks,” Jitendra Panda, chief executive officer at Peerless Securities, said by phone from Kolkata. “Volatility is expected to rise before the monthly expiry, the Reserve Bank of India meeting next week and the start of the earnings season in October. We’re seeing risk-off trade returning.”
Overseas investors sold about $60mn of shares in the past two sessions, paring this month’s inflow to $649mn, which is still the highest in Asia after South Korea, data compiled by Bloomberg show. Foreigners have been net buyers of local shares for seven months, the fastest pace since November 2014. The inflows have put Indian equities on course for their first quarterly climb since March 2015.
Financial markets judged the first American presidential debate that took place on Monday in favour of Democrat Hillary Clinton. An election victory for Republican candidate Donald Trump may hurt bonds in emerging markets by weighing on global trade, according to Aberdeen Asset Management Asia. The outcome of the elections won’t “materially impact” the Indian markets, according to KR Choksey Shares & Securities.
“We will watch the elections keenly but capital flows to our markets are not significant,” said Deven Choksey, managing director of the Mumbai-based brokerage.
India’s stock market is the world’s ninth-biggest with a value of $1.7tn. Global funds have bought $6.8bn of local shares this year, less than the $9.5bn they’ve plowed into South Korean equities and $14bn in Taiwanese shares in the period, data compiled by Bloomberg show.
Tata Consultancy Services, the largest software services exporter, and Lupin were among the top gainers on the Sensex. Multi Commodity Exchange of India Ltd jumped 7.5%, the most since February 2015, after CNBC television channel reported that the exchange has increased non-agri commodities transaction charges by 25%.
Larsen & Toubro, the largest engineering company, lost 2% in a third day of declines, while Adani Ports & Special Economic Zone was the worst performer on the Sensex. Bharti Airtel decreased to a three-week low.
Meanwhile, the rupee yesterday ended at a fresh two-week high of 66.50 on sustained selling of the US currency by exporters and banks.
