Indian stocks advanced as investors bought companies most-tied to the economy after the UK’s decision to leave the European Union left global markets in disarray.
Drugmaker Lupin surged the most in three months, while Bharti Airtel rallied the most in a week. Hindustan Unilever (HUL) had the steepest advance since March 21 and ITC, the largest tobacco company, climbed to a one-month high. Tata Motors, Tata Consultancy Services (TCS) and Wipro, which get about a quarter of their sales from Europe, were the worst performers on the S&P BSE Sensex.
About $3.6tn has been wiped from the value of global shares since the day of the vote last Thursday. In India, an index of smaller companies climbed to its highest level since January as investors snapped up companies that gain the most from Prime Minister Narendra Modi’s growth-boosting policies and have no business links with Europe.
The S&P BSE Sensex closed 0.46%, or 121.59 points, higher at 26,524.55, while the Nifty 50 closed 0.41%, or 33.15 points, higher at 8,127.85.
“India could be a relatively safer haven,” Arvind Sanger, managing partner at Geosphere Capital Management, told Bloomberg TV India. “India remains one of the few bright spots in the world with everybody else being in trouble, and you have a government that is singing the right notes. Money will come in slowly.”
Gains in Indian equities came amid a rebound in global markets, with European stocks, the pound and commodities all climbing for the first time since Britain’s shock vote to exit the European Union amid speculation policy makers will take steps to limit any economic fallout. Investors are now looking to central banks for support, with Fed Funds futures indicating there is a 20% chance the Federal Reserve will cut interest rates by February and a 9% likelihood of an increase. Prior to the UK referendum, there was zero prospect of a reduction and a 52% probability of an increase.
Overseas funds sold $85mn of local shares on June 24. Global investors have still invested $572mn in Indian equities in June, set for the fourth month of purchases, data compiled by Bloomberg show.
Meanwhile the rupee yesterday erased all intraday gains and closed flat against the US dollar, as month-end dollar demand from oil importers soaked up the dollar supply.
The currency closed at 67.95, unchanged from its previous close. The local currency opened at 67.81 a dollar and touched a high and a low of 67.72 and 67.96, respectively.
So far this year, the rupee has fallen 2.64%, while foreign institutional investors (FIIs) have bought $2.76bn in equity and sold $2bn in debt markets.
India’s 10-year bond yield closed at 7.452%, compared with Monday’s close of 7.458%. Asian currencies closed higher. Indonesian rupiah was up 1.24%, South Korean won 0.95%, Singapore dollar 0.65%, Malaysian ringgit 0.54%, Philippines peso 0.29%, Taiwan dollar 0.26%, Thai baht 0.17% and China offshore 0.12%. However, Japanese yen was down 0.32%.
The dollar index, which measures the US currency’s strength against major currencies, was trading at 95.93, down 0.64% from its previous close of 96.544.