India’s mid and small-cap stocks advanced, helped by chemicals producers and metal makers, even as the benchmark index closed little changed in volatile trading.
Sudarshan Chemical Industries, a producer of colour pigments, surged the most in a year, while A2Z Infra Engineering soared by the 20% limit. Tata Steel, the top producer of the alloy, rallied to a 10-month high. Hindalco Industries, the nation’s second-biggest aluminium maker, extended last month’s 28% rally.
The S&P BSE SmallCap Index climbed 0.9%, while the benchmark S&P BSE Sensex rose less than 0.1% to 24,900.63 points after changing direction at least 20 times. Investor attention shifted back to company earnings after the market discounted the Reserve Bank of India’s interest-rate cut that was widely predicted.
“Investor interest shifted to small- and mid-caps after last month’s rally in the large companies,” Paras Bothra, a Mumbai-based vice president of equity research at Ashika Stock Broking, said by phone. “The RBI event is over. Investors will keenly watch the earnings season to see if profit growth recovers or gets delayed further.”
The Sensex last month capped its best month since January 2012 as a government pledge to further pare the fiscal gap and speculation of an interest-rate reduction spurred capital inflows. Company profits remain on the opposite trajectory, falling in four of the last five quarters in the worst run since the financial crisis.
Sudarshan Chemical surged 19% to its highest level since January 1. Bodal Chemicals, a maker of dyes, climbed to a record. The company has gained 42% in the past month. Rival Kiri Industries extended a five-day surge that’s doubled its share price. Thirumalai Chemicals rallied to a three-month high.
“There have been reports that China is shutting some chemical factories because of high pollution levels, and investors are betting that Indian companies will benefit from that,” Ashika’s Bothra said. “That’s why we’re seeing a rally in chemical companies.” Tata Steel soared 5.2%, the best performer on the Sensex. The shares have rallied 26% this year. Hindalco climbed 4.8%, the most since March 23. Tata Motors extended last month’s 29% climb.
The Sensex has fallen 4.7% this year and trades at 15.2 times 12-month projected profits versus 11.5 for the MSCI Emerging Markets Index. Foreigners sold $140mn of local stocks on April 5, the first outflow since March 15. 
Meanwhile the rupee yesterday closed at a two-week low against the US dollar, as a fall in local shares indicated dollar inflows could slow.
The currency closed at 66.71— a level last seen on 22 March, down 0.30% from its previous close of 66.46. The rupee opened at 66.40 and touched a low of 66.72.
“Most of the positives from the RBI (Reserve Bank of India) policy have now been factored in and so the rupee is back to the expected weakening trend. Also, some who had expected a 50 basis points cut from RBI are now covering their short positions,” said the head of currency trading at a local bank.
On Tuesday, RBI governor Raghuram Rajan cut the benchmark repurchase rate to 6.5% from 6.75% and announced a change in its liquidity stance.