India's Sensex Climbs Most in Three Months, U.S. Fed on Standby

(Bloomberg) -- Thanks to the U.S. Federal Reserve, it took only one session for India’s stocks to wipe away the month’s losses.

The S&P BSE Sensex rose 1.9 percent on Thursday, its biggest advance in three months, to 36,256.69 in Mumbai on the expiry day of monthly derivatives contracts. The rally helped the gauge end January with a 0.5 percent gain, data compiled by Bloomberg shows. The NSE Nifty 50 Index added 1.7 percent on Thursday.

The U.S. central bank’s decision to put interest rate increases on hold raised investor optimism that capital flows to emerging markets will resume. Stocks across Asia surged after the dovish statement helped ease concern that policy makers would carry out plans to raise interest rates, despite data suggesting the world’s largest economy is cooling.

At home, Prime Minister Narendra Modi will have a last chance to win over voters ahead of a national poll, with possible populist spending measures as his government presents the last federal budget of its term on Friday. Speculation is rife that Modi’s fiscal plan includes a cash transfer program for farmers entailing additional spending of 700 billion rupees ($9.8 billion), support for small businesses and some reprieve for taxpayers.

Strategist View

  • “ The U.S. Fed status quo, in the midst of looming fears over an impending economic slowdown, and also as the probability of future hikes may be far and few, catapulted the markets to higher levels,” said Joseph Thomas, head of research at Emkay Wealth Management.
    • “There are high expectations from the interim budget by way of measures that would alleviate agrarian distress and boost employment and consumption levels,” he said.
  • “We feel the budget will be a non-event. Given the water-tight scenario on macro front, be it fiscal deficit, volatile crude oil prices, depreciating rupee or the stagnating indirect tax collections, there is no scope for playing to the galleries,” Dharmesh Kant, head of research at IndiaNivesh Securities wrote in a note.
    • “However, some relief to farmers in the form direct benefit transfer based on land holdings, direct transfer of fertilizer subsidy on purchases made and raising of minimum support price for essential food grains may be on the cards,” he said.

The Numbers

  • All 19 sector sub-indexes compiled by BSE Ltd. gained, led by a gauge of information technology companies.
  • Maruti Suzuki India Ltd. and the Bajaj Auto Ltd. gave the biggest boosts to the benchmark index.
  • Axis Bank Ltd. and Tata Motors Ltd. were the top performers on the Sensex
  • ICICI Bank Ltd. fell 0.5% as its former chief executive was asked to repay nine years of bonuses.
  • Dewan Housing Finance Corp Ltd. tumbled 15.9%, dropping for a fourth consecutive session after a report its accounts are being examined by India’s Ministry of Corporate Affairs.

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