Employee monitoring securities at the BSE (Photographer: Dhiraj Sing/Bloomberg)

India's Sensex Rises to Trim First Monthly Drop of the Year

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(Bloomberg) -- Indian shares reversed declines, led by a rally in consumer stocks, as investors weighed the impact of the nation’s new national sales tax on corporate profits. The key indexes gained for a second day, paring their first monthly decline in 2017.

The benchmark S&P BSE Sensex and the NSE Nifty 50 indexes each rose 0.2 percent at the close in Mumbai, extending their second quarterly advances. The gauges reversed losses in the last hour of trade.

ITC Ltd. rose the most among Sensex companies. Asia’s second-largest cigarette maker climbed to a record as CLSA India Pvt. said in an investor note that it expected a reduction in the company’s expense under the new sales tax system.

The goods and services tax goes into effect overnight and, according to the government, will boost economic growth as it merges the world’s second-most populous country and its 29 states into a single market. Not everyone is sanguine about the roll out.

“There are a few concerns getting built among investors about the new unified sales tax and its impact on the company earnings,” said Hemen Kapadia, a Mumbai-based senior vice-president of institutional equities at K.R. Choksey Shares & Securities Pvt. “I don’t see a big selloff despite negative global cues as domestic funds are sitting on a reasonable amount of cash, which will provide support.”

Domestic funds have been net buyers of Indian shares for ten straight months through May. They have purchased nearly 321 billion rupees ($5 billion) of local shares this year, while foreigners have bought more than $8 billion of stocks till June 28, according to data compiled by Bloomberg.

Eight of the 13 sector gauges compiled by BSE Ltd. rallied, led by the S&P BSE Fast Moving Consumer Goods Index’s 2.2 percent climb to a record close. The Sensex and Nifty trail only South Korea’s Kospi and Hong Kong’s Hang Seng Index among major Asian markets this year.

Summary

  • Bank of Baroda rises 4%, most on Nifty; stock was raised to buy from neutral at Nomura
  • Dr. Lal PathLabs Ltd. plunges 6.3%, most on S&P BSE 500 Index; volume >28x 3-month full-day average; ~2% equity changed hands in 2 blocks, buyers and sellers weren’t immediately known
  • InterGlobe Aviation Ltd. drops 5.7%, most on S&P BSE 200 Index; falls second day after expressing interest in buying Air India stake
  • Unichem Laboratories Ltd. adds 2.6% after U.S. FDA clears Goa plant

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