India’s benchmark stock gauge capped its best week in four years as foreign investors increased their holdings and the rupee strengthened.
State Bank of India and ICICI Bank, the country’s two biggest lenders, were the gauge’s top performers for the week with gains of 21% and 19%. Tata Motors, the owner of Jaguar Land Rover, rose to a six-week high. Bharat Heavy Electricals, India’s largest power-equipment maker, was the top gainer on the S&P BSE Sensex yesterday.
The Sensex climbed 6.4% from February 26, the most since the week ended December 2, 2011. It rose 0.2% to close at 24,646.48 in Mumbai yesterday, after changing direction at least 20 times. Global funds bought a net $860mn of local stocks in the first three days of March, paring the year’s outflows to $2bn. The rupee completed its biggest weekly advance since September 2013. Indian markets will be shut on Monday for a local holiday.
“After a tear away rally we can see some consolidation, and we have the extended weekend coming up,” Paras Bothra, a Mumbai- based vice president of equity research at Ashika Stock Broking, said in an interview. “The rally was on the back of the fiscal consolidation in the budget and the good news is that global markets are stabilising and foreign inflows are coming back.” He is advising clients to buy shares of consumer-goods companies.
A rebound in oil prices, improvements in US economic data and optimism that China will increase stimulus to spur growth have helped revive appetite for emerging-market assets. Finance Minister Arun Jaitley in Monday’s budget affirmed the government’s goal of cutting the fiscal deficit to a nine- year low of 3.5% of gross domestic product in the year starting April 1. The administration plans to boost spending on roads, ports, power plants and other public projects, while increasing allocation to a rural jobs programme.
Bharat Heavy Electricals surged 4.2% yesterday to end the week with a 13% gain, its biggest since May 2014. The stock is still this year’s worst performer on the Sensex, having lost 36%. Tata Motors jumped 14% this week, trimming 2016’s drop to 12%. Tata Steel climbed 16%. Lenders jumped this week after the central bank eased rules allowing them to bolster capital ratios. State Bank of India increased 3.1% in a sixth day of gains Friday to cap its best week since May 2009. ICICI Bank’s 19% surge and the S&P BSE India Bank Index’s 12% advance also were the biggest since May 2009.
The NSE Nifty 50 Index added 0.1% yesterday and 6.5% during the week to 7,485.35, its highest close in a month. The Nifty 7,500 calls have the biggest open interest among bullish options, which signals that the index will find it tough to cross that zone, according to Motilal Oswal Securities.
“Futures and options positions signal that markets could take a pause at these levels,” Rikesh Parikh, vice president at Motilal Oswal in Mumbai., said in a phone interview. “Most investors couldn’t capitalize on the swift upmove and are waiting for fresh cues.”
Despite this week’s rally, the Sensex has lost 5.6% this year as global funds dumped local shares amid a selloff in emerging-market assets. The gauge trades at 15.1 times its 12- month projected earnings, compared with 12.7 times for the MSCI AC Asia Pacific Index.
Meanwhile the rupee completed its biggest weekly gain since September 2013 as foreign funds pumped money into local stocks amid a revival in global sentiment for equities.
The rupee rallied 2.3% from February 26 to 67.0950 a dollar in Mumbai, according to prices from local banks compiled by Bloomberg. It rose 0.4% yesterday and climbed to as high as 67.0850, the strongest level since January 14.
A rebound in oil prices, improvements in US economic data and optimism that China will increase stimulus to spur growth have helped revive appetite for emerging-market assets.
The rupee’s recent rally has helped pare its 2016 decline to 1.4%. The currency fell to 68.7875 a dollar on February 26, near a record low of 68.845 seen in August 2013.
The resumption in foreign inflows to Indian stocks should support the rupee, Ashima Goyal, an adviser to the Reserve Bank of India, said on Friday, adding that the currency will stay in a 67-69 a dollar range this year.
Indian sovereign bonds also gained this week. The yield on notes due January 2026 dropped 15 basis points to 7.63%, prices from the RBI’s trading system show.