Indian Stocks at Four-Month High Amid Signs of Economic Rebound

Indian stocks began the week on the front foot after early indicators of economic growth pointed to a recovery and the progress of the rainy season fueled expectations of healthy demand in the nation’s rural areas.

The S&P BSE Sensex climbed 1.3% to 36,487.3 at the close, the highest level since March 6. The NSE Nifty 50 Index advanced 1.5% in the fourth day of gains.

India’s Services PMI climbed to 33.7 in June, rising for a second month after the record low of 5.4 in April. A reading below 50 signals contraction in activity. Sufficient rain and relatively less exposure to the coronavirus is lifting purchasing power in the hinterland, with Escorts Ltd. reporting “unprecedented” demand for its tractors last month.

“The monsoon has been good and that is helping sales of fertilizer, two-wheelers and tractors,” said A. K. Prabhakar, head of research at IDBI Capital Market Services Ltd. in Mumbai.

Buoyant Asian markets spurred investors to keep adding to gains of about 40% from the lows in March, said Sanjeev Hota, head of research at Mumbai-based Sharekhan Ltd. The news of de-escalation in geopolitical tensions between India and China also helped boost sentiment. Metal producers were among the biggest winners on Monday, with the S&P BSE Metal Index advancing 2.5%.

The Sensex is at a four-month high, even as India overtook Russia to become the country with the third-largest caseload of coronavirus infections. Only the U.S. and Brazil now have more infections than India. IDBI Capital Market Services’ Prabhakar is advising clients to hold 30-40% of their assets in cash, as he expects there will be opportunities to buy stocks at lower prices.

Yield on the benchmark 10-year government bond fell to 5.84%. The rupee fell 0.1% to 74.6837 per dollar.

The Numberss

  • Sixteen of 19 sector sub-indexes compiled by BSE Ltd. gained, led by a gauge of energy companies
  • Twenty-five Sensex shares rose while five fell
  • Reliance Industries Ltd. contributed most to the index advance, rising 3.6%, Mahindra & Mahindra Ltd. was the biggest winner, with a 7.6% gain; Bajaj Auto Ltd. was the biggest loser, dropping 1.3%

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