Indian Stocks Snap Record-Breaking Rally on Virus Jitters
(Bloomberg) -- India’s stock benchmark fell from a record peak as restrictions to curb the coronavirus outbreak spurred a selloff in many Asian markets.
The S&P BSE Sensex closed down 1.3% and the NSE Nifty 50 Index fell by a similar magnitude, as stocks across Asia Pacific dropped after a resurgence in infections prompted new restrictions in cities from Australia to the U.S. and Tokyo raised its Covid-19 alert to the highest of four levels. Both Indian gauges had closed at all-time highs on Wednesday after four straight days of gains.
Valuations are becoming a concern for equity investors in India, with the Sensex 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 above its 10-year average.
“The larger trend is bullish, and while most analysts would recommend buying the dips, it might be prudent to step back at this juncture and take a larger view on valuations and multiples,” said Nikhil Kamath, chief investment officer at True Beacon, an India-based hedge fund.
Indian stocks have benefited from a rally in value and cyclical shares this month as drug makers announced positive results from trials. On Wednesday, Pfizer Inc. said its vaccine was 95% effective, paving the way to apply for the first U.S. regulatory authorization.
As the world’s second-largest virus hotspot, India is seen as more sensitive to vaccine-related developments than other Asian markets, with strategists expecting economic and earnings growth to recover as the pandemic eases. Foreign buyers have pumped $5.1 billion into Indian stocks this month, on track for record November inflows, according to data compiled by Bloomberg.
Stocks have also been helped by better-than-expected results for the quarter, with 70% of the companies on the Nifty 50 index beating or matching analyst estimates.
The yield on the 10-year sovereign bond was steady at 5.88%, while the rupee weakened 0.1% to 74.27 against the dollar.
- Fifteen of 19 sector sub-indexes compiled by BSE Ltd. declined, led by a gauge of banking shares
- Nine Sensex shares rose and 21 fell
- ITC Ltd. was the biggest boost to the index, and gained 2.1%
- HDFC Bank Ltd. contributed most to the index’s decline and lost 2.4%
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