India’s benchmark stock index pared its steepest weekly loss in more than four years and mid-cap companies rallied as Chinese equities rebounded after the government suspended a circuit-breaker system and the nation’s central bank moved to stabilise the yuan.
Bajaj Hindusthan Sugar and Balrampur Chini Mills jumped 10% each, pacing gains among makers of the sweetener. Tata Motors, owner of Jaguar Land Rover, was the top performer on the S&P BSE Sensex. Reliance Industries rose after CLSA added the stock to its Asia ex-Japan long-only portfolio. Reliance Power and Adani Power helped the BSE India Power Index clock its biggest gain in three months.
The Sensex gained 0.3% at the close, narrowing its first weekly loss in four weeks to 4.7%, still the steepest since November 2011. The S&P BSE MidCap Index and a gauge of small-cap companies rebounded from its biggest declines in four months. Gains may fade even as Chinese authorities try to stabilize markets and Indian companies enter the quarterly reporting season next week.
“We’d be looking at the results season, which doesn’t give much hope, and then the federal budget, for a hint of some change in trajectory,” Ajay Srivastava, managing director at Dimensions Consulting, said in an interview with Bloomberg TV India yesterday. “We don’t have a good feeling about the budget either. The rally will be sold into.”
Shanghai stocks rallied after Chinese policy makers decided to abandon a circuit-breaker system that was introduced to calm market volatility triggered an early close to trading twice this week. The central bank set the yuan’s reference rate little changed yesterday after an eight-day stretch of weaker fixings that roiled global markets. Balrampur Chini surged the most since November 18. Bajaj Hindusthan jumped the most since October 21, while Dhampur Sugar Mills rallied 11%. Raw-sugar futures for March delivery jumped 2.3% in New York on Thursday, ending a three-day slump. Global prices have rebounded about 40% since reaching a seven-year low in August.
Tata Motors rose 2.9% to pare the weekly loss to 12%, which is still the most on Sensex. Reliance increased 1.2%. Reliance Power gained 5.8%, while Adani Power surged 4.5%. NTPC, India’s biggest power producer, ended a five day drop with a 1.2% gain.
Sun Pharmaceutical Industries, the nation’s most valuable drugmaker, and ITC, India’s biggest cigarette company, both advanced 1.3%.
Global funds sold a net $17mn of Indian stocks on January 7. They bought $3.3bn of shares last year, the smallest amount in four years.
The Sensex dropped 5% last year, following a 30% jump in 2014, as euphoria over Prime Minister Narendra Modi’s economic agenda waned and concern grew that tighter US monetary policy will curb the appeal of emerging-market assets.
The 30-stock gauge trades at 14.9 times projected 12-month earnings, compared with the MSCI Emerging Markets Index’s multiple of 10.6. Meanwhile the rupee completed its biggest weekly decline since November as global funds sold the nation’s stocks amid a surge in volatility.
Investor appetite for riskier assets ebbed as a turmoil in currency and equity markets in China, Asia’s largest economy, spread to the region. Foreign holdings of Indian shares fell $281.5mn in the four days through Thursday, halting a three-week increase.
The rupee weakened 0.7% from January 1 to 66.6350 a dollar in Mumbai, the most since the five days ended November 27, prices from local banks compiled by Bloomberg show.
The currency, which rose 0.4% yesterday, sank 4.7% in 2015 to complete a fifth straight annual decline.
“The rupee is reflecting capital outflows and the volatility in China,” said Ankur Jhaveri, co-head of currencies and rates at Edelweiss Financial Services in Mumbai.
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