Indian shares closed mixed as investors assessed the outlook for company earnings versus stock prices.
Key equity indexes retreated and gauges comprising mid- and small-sized companies advanced.
The benchmark S&P BSE Sensex dropped 0.4% to 33,685.54, its third day of retreat, at the 3:30pm close in Mumbai. The NSE Nifty 50 Index fell 0.5% as seven stocks declined for every three that rose. The S&P BSE MidCap Index advanced 0.5% and the S&P BSE SmallCap Index gained 0.8%, both extending rally to a fourth day.
Asian Paints Ltd’s 2.1% climb was the steepest among Sensex members after Jefferies India Pvt kept its buy rating on the stock, citing a recovery in sales of consumer firms due to an increase in spending by customers. Private lender Yes Bank dropped 2.2%, halting a three-day rally.
“India’s markets will stay volatile and trade in a range over the next six months, but what needs to be seen is whether they will continue to show the resilience they have shown in the past few weeks of absorbing negative news,” said Sanjay Sinha, founder of Mumbai-based Citrus Advisors.
The two benchmark Indian equity gauges’ declines of more than 2.5% this year place them among Asia’s biggest losers in US dollar terms. Even so, they’re still among the costliest with price-earnings ratios of more than 22 times after finishing 2017 as the region’s best performers.
Earnings for the 50 Nifty companies rose an average 26% in the last three months of 2017 from a year earlier versus 16% growth in the previous quarter, according to data compiled by Bloomberg. The pace is estimated to increase to an average 28% for January to March as the companies start reporting earnings early next month.
“There’s a fair amount of optimism as far as valuations are concerned as the earnings trajectory is showing an improvement,” Citrus’s Sinha said. Sixteen of the 19 sector gauges compiled by BSE Ltd. fell, paced by a 1.2% drop in the S&P BSE Energy Index. The S&P BSE Consumer Discretionary Goods & Services Index rose the most, up 0.3%. The NSE Volatility Index retreated 0.2%, paring this year’s advance to 13%.
Meanwhile, the Indian rupee weakened by 11 paise to close at 64.94 against the US dollar from its previous close at 64.83.
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