Indian Stocks Advance, Ignoring Rising Infections, Weak Economy

(Bloomberg) -- Indian equities rose in volatile trading as investors assessed recent gains in the context of a shrinking economy and increasing coronavirus infections.

The benchmark S&P BSE Sensex closed 0.2% higher in Mumbai, reversing earlier falls of as much as 0.8%. The index has risen more than 45% from a low in March, when it dropped to its lowest since 2016, outperforming the MSCI Asia Pacific Index during this period.

While Asia’s third-largest economy has eased some of the virus-induced restrictions, its outlook is yet to improve after having posted its worst contraction on record in the June quarter. India has now overtaken Brazil as the country with the second-highest number of infections.

“Professional investors are fearing that a correction may come as recent gains are overdone and economy is worsening,” Chokkalingam G, chief investment officer of Equinomics Research & Advisory Ltd. said. “Retail investors, in contrast to professionals, are still very excited to participate.”

A gauge of technology stocks climbed the most among BSE’s industry groups. Smaller stocks such as Ramco Systems Ltd. and Tanla Solutions Ltd. rose the most on the S&P BSE Information Technology Index

Hindustan Unilever Ltd. was the top gainer on the Sensex while Mahindra & Mahindra Ltd. dropped 3.5%. The NSE Nifty 50 index rose 0.2%.

The yield on India’s benchmark 10-year government bonds rose six basis point to 5.99%, while the rupee weakened to 73.46 per dollar.

The rising infections and the lockdowns in some states are weighing on the pace of economic recovery, said Deven Choksey, managing director at KRChoksey Investment Managers Pvt.

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