An old man looks up at an electronic screen displaying stock figures at the Bombay Stock Exchange (BSE) in Mumbai, India. (Photographer: Prashanth Vishwanathan/Bloomberg)

Bulls Neglect Dip in U.S. Futures as India's Stocks Extend Rally

(Bloomberg) -- Indian equities rose for a second straight day as investors brushed aside a fall in U.S. equities futures after the world’s biggest stock market on Wednesday had its steepest rally since 2009.

The benchmark S&P BSE Sensex climbed 0.4 percent to 35,807.28 at the 3:30 p.m. close in Mumbai, extending Wednesday’s 0.5 percent gain. The NSE Nifty 50 Index added 0.5 percent as the markets also evaded volatility expected from expiry of monthly futures and options contracts later Thursday. Futures on the S&P 500 Index fell 1.4 percent, reversing a high of as much as 0.4 percent.

With Indian equities set to post a gain for 2018, defying declines in most other countries, investors are now focusing on earnings for the current quarter, which companies will start reporting from around the second week of January. Eyes will then be set on the national elections to be held around May, with a closer-than-expected fight between the main opposition Indian National Congress and the ruling Bharatiya Janata party.

Bulls Neglect Dip in U.S. Futures as India's Stocks Extend Rally

Strategist Views

  • “Markets will continue to react to the happenings around globally for a while on lack of any local factors,” said A. Balasubramanian, chief executive officer at Aditya Birla Sun Life AMC Ltd. in Mumbai, India’s third biggest money manager.
  • “2019 could turn out to be a good year as fundamentals of the economy -- such as increasing tax compliance and collection and infrastructure building -- are already in place and it is only a question of gaining momentum now,” Balasubramanian said.
  • “The market is likely to be focused on earnings, pre-poll alliances, rate decisions, union budget, government spending and global cues to make its moves in the first quarter of 2019,” Ridham Desai and Sheela Rathi, analysts at Morgan Stanley India Co., wrote in a note on Dec. 26.

The Numbers

  • Nine of the 19 sector indexes compiled by BSE Ltd. climbed, paced by a gauge of energy companies. Brent crude futures -- which jumped nearly 8 percent on Wednesday to $54.47 a barrel -- traded at $53.20.
  • Reliance Industries Ltd. was the biggest gainer on the Sensex, rising 2 percent.
    • SBI Life Insurance Co. gained 2.5 percent on report that a consortium will buy 10 percent stake in the company for about 52 billion rupees ($742 million).
  • Nifty has risen 2.4 percent in 2018, set for its worst annual return in three years. The Nifty Midcap 100 Index has fallen 17 percent, its worst year since 2011.
  • Traders have rolled over 66 percent of their derivatives linked to Nifty as of 3:54 p.m. compared with the past six months’ average of 69 percent on expiry day, according to data compiled by Bloomberg.
    • The roll cost, or price to replace December futures and options with January, was 36 basis points versus a six-month mean of 45 basis points. In India, contracts end on the last Thursday of every month.

Analyst Notes

  • Farm Waivers Will Hurt Three Indian Lenders More, Edelweiss Says
  • Earnings, Election on Indian Investors Focus Now: Morgan Stanley
  • JK Lakshmi Cement Likely to Outperform Peers: ICICI Securities

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