Indian Stocks Surge in Diwali Session, Buoyed by Earnings Growth

(Bloomberg) -- Indian shares rallied in a ceremonial late-evening session to mark Diwali, the Hindu festival of lights, as quarterly earnings of some of the biggest companies fueled optimism about a recovery in Asia’s third largest economy.

The S&P BSE Sensex rose 0.5% to 60,067.62 in the one-hour session, led by gains in index heavyweights HDFC Bank Ltd. and Reliance Industries Ltd. The NSE Nifty 50 Index also climbed by a similar magnitude. All of the 19 sector gauges compiled by BSE Ltd. advanced, led by a measure of automobile companies. 

“With the economic cycle picking up, we expect the corporate earnings growth to revive as well,” said Motilal Oswal, the chief executive of Mumbai-based Motilal Oswal Financial Services Ltd. “Markets have always moved in tandem with earnings growth.” 

The Sensex has ended higher in seven of the past 10 Diwali-day sessions, known as Muhurat trading, and has risen about 38% in the year since the last celebration. The broader market has also rallied, outperforming the benchmark. Markets will remain shut on Friday.

Of the 38 Nifty companies that have announced September-quarter results so far, 22 have reported numbers ahead of analysts’ estimates, while 12 have trailed. Three met estimates, while one had none available.

The centuries-old Diwali tradition is marked by seeking the blessings of Hindu Goddess Lakshmi, for wealth and prosperity. Even as the pandemic ravaged India’s economy during the past two years, government and central bank measures to support growth helped drive the Sensex to a series of record highs. The gauge has more than doubled from a pandemic low level touched in March 2020. 

“It will be unfair to assume that the benchmark indexes will deliver similar returns in the short term,” said Krishna Kumar Karwa, managing director at Emkay Global Financial Services Ltd. Investors should favor sectors that will benefit from the tailwinds the country’s economy is expected to enjoy in the coming years. “Over the medium term, investors can make significant wealth by investing in domestic equities.”

©2021 Bloomberg L.P.