Economic Green Shoots Lift Indian Shares as Bond Issuers Emerge
Vehicles travel along a road during the festival of Dhanteras at night in Atta Market in Noida, Uttar Pradesh, India. (Photographer: Prashanth Vishwanthan/Bloomberg)

Economic Green Shoots Lift Indian Shares as Bond Issuers Emerge

Indian shares that tend to do well during times of economic growth rose and more companies offered dollar bonds after stronger factory output added to signs of a rebound.

Oil, gas, and capital goods stocks climbed, with industry measures of the so-called cyclical shares leading gains among India’s sub-indexes. Burger King India Ltd. more than doubled in its Mumbai trading debut from its initial public offering price. Two companies started marketing dollar notes.

A report published after markets closed Friday showed factory output expanded the most since February, the latest indication of recovery from one of the world’s worst recessions amid the pandemic. Later Monday, a release will probably show inflation eased in November, while remaining above the central bank’s 2%-6% target range, according to economist estimates in a Bloomberg survey.

“I wouldn’t mind having a reasonably large allocation to cyclicals,” said Kenneth Andrade, chief investment officer at Old Bridge Capital Management Pvt. in Mumbai. “Valuations in commodity-related stocks are very much in your favor right now.”

The S&P BSE Oil & Gas Index added 2%, while the S&P Capital Goods Index rose 2.1% in Mumbai. The benchmark S&P BSE Sensex and the NSE Nifty 50 index advanced 0.3%, both closing at record highs. The deployment of a Covid-19 vaccine in the U.S. starting this week buoyed regional sentiment toward cyclicals, with an Asia-Pacific equity gauge adding 0.2%.

Adani International Container Terminal Pvt. and a unit of JSW Steel Ltd. are seeking to price dollar notes, according to separate people familiar with the matter. Vedanta Resources Ltd. sold dollar junk notes last week and, if the two others price, that would be the most Indian issuers since February.

Indian dollar notes have returned 1.1% so far this month, the most in Asia and topping an average 0.3% for the region, according to Bloomberg Barclays indexes. While dollar hedging costs for local companies recently rose to a 7-month high, they’ve edged down in recent days.

“The worst for India’s economy seems over,” said A.S. Thiyaga Rajan, a senior managing director in Singapore at Aquarius Investment Advisors Pte. “Rare offerings from Indian issuers in the recent past has created an appetite for dollar bonds from local companies.”

There are still risks. With about 60,000 confirmed coronavirus cases on Saturday marking India’s steepest single-day jump since October, the nation continues to have the world’s second-worst coronavirus outbreak after the U.S.

The yield on the benchmark 10-year government bond dropped by one basis point to 5.89%, while the rupee strengthened 0.1% to 73.5575 per U.S. dollar.

The Numbers

  • Sixteen of 19 sector sub-indexes compiled by BSE Ltd. advanced, led by a gauge of capital goods companies
  • Nineteen shares on the Sensex rose, while 11 fell
    • ICICI Bank Ltd. contributed most to the index advance, and added 2.1%; Oil & Natural Gas Corp. was the biggest winner, advancing 4.9%

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