India Stocks Rise After Volatile Day as Cyclical Trade Continues

Indian stocks ended the day with gains after a volatile trading session as investors continued to snap up shares on expectations of a domestic economic recovery.

The S&P BSE Sensex closed up 0.5% at 44,180.05 in Mumbai after falling as much as 0.4%, while the NSE Nifty 50 Index also climbed by a similar magnitude. Both gauges closed at all-time highs.

India’s $2.2 trillion market is seen as more sensitive to vaccine-related developments than other Asian markets, feeding optimism amid signs of progress. Stocks have also been helped by better than expected results for the September quarter, with 70% of the companies on the Nifty 50 index beating or matching analyst estimates.

“A combination of strong domestic economic data, corporate earnings upgrades and favorable vaccine/Covid trend is making us more optimistic on cyclical recovery in India,” analysts at Jefferies Financial Group Inc. wrote in a note published Tuesday. The brokerage is overweight property, financials and consumer discretionary shares.

After reaching new highs this month, the Sensex is trading at levels some technical analysts consider to be overbought. The gauge is trading at a 12-month price-to-estimated earnings multiple of about 22 times -- a record high and more than two standard deviations higher than its 10-year average.

India Stocks Rise After Volatile Day as Cyclical Trade Continues

“Valuations are at a slight premium to long-term averages although macro trends and earnings recovery continue to be positive signs,” said Gautam Duggad, head of research at Motilal Oswal Securities Ltd.

While India’s daily coronavirus infections are down from a September peak, the country still has the world’s second highest number of cases as new infections surge in the U.S. and Europe.

The yield on the 10-year sovereign bond was steady at 5.88%, while the Indian rupee strengthened 0.4% to 74.1925 per dollar.

The Numbers

  • Eleven of 19 sector sub-indexes compiled by BSE Ltd. advanced, led by gauges of capital goods and autos; measures for consumer goods and IT firms fell
  • 15 Sensex shares rose and 15 fell
    • Larsen & Toubro Ltd. contributed most to the index’s advance with a 6.2% gain after the firm won an order
    • Hindustan Unilever Ltd. fell the most, declining 2.1%

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