Brokers speak on the telephone during trading hours inside a dealing room at a bank in Mumbai, India (Photographer: Abhijit Bhatlekar/Bloomberg News)  

Reversal in U.S. Futures Helps India Stocks Halt Three-Day Slump

(Bloomberg) -- Indian equities erased steep losses, boosted by a reversal in U.S. stocks futures, as the nation’s key indexes capped their first gains in four days.

The benchmark S&P BSE Sensex climbed 0.5 percent to 35,649.94 at the 3:30 p.m. close in Mumbai, reversing a decline of as much as 1.3 percent. The NSE Nifty 50 Index rose 0.6 percent. March contracts on the S&P 500 Index gained 0.5 percent, after plunging as much as 1.1 percent and rising as much as 0.8 percent in volatile trading.

Indian stocks are seen following global cues due to an absence of local factors currently. Investors have their eyes set on national elections around May, as recent wins in three key states for the Indian National Congress opposition party have made its national contest with the ruling Bharatiya Janata Party tighter than expected.

Reversal in U.S. Futures Helps India Stocks Halt Three-Day Slump

Strategist Views

  • “There are no local cues for Indian equities at least till the second or third week of January, and it seems that stocks will take direction from global events till then,” said Deepak Jasani, head of retail research at HDFC Securities Ltd. in Mumbai.
  • “I think markets are largely oversold and there could be some covering of short positions by traders also ahead of the expiry of the December derivatives contracts tomorrow,” Avinash Gorakshakar, head of research at Mumbai-based Joindre Capital Services Ltd. said.
    • “Emergence of flows from overseas investors if the U.S. Fed signals less rates hikes can be a positive for an emerging market like India,” he said.
  • “Any bounce in markets will be hard to sustain as there are a lot of negative expectations arising out of political uncertainties ahead of general elections in May,” Jasani said.
    • “Investors should aim at cleaning up and restructuring their portfolios and raise some cash at every bounce in the market till the national elections,” he said. “They can deploy that cash in a bigger sell-off expected around the election.”

The Numbers

  • Thirteen of the 19 sector indexes compiled by BSE Ltd. retreated, paced by a gauge of telecom stocks.
  • Wireless carrier Bharti Airtel Ltd. gained the most among Sensex members, rising 3.7 percent.
  • Hindustan Unilever Ltd. rose 0.4 percent, reversing a decline of as much as 2.4 percent, after its parent said it was considering legal options for $55 million tax fine on the Indian unit.
  • Total trading volume of Sensex stocks was 29 percent lower than the 30-day average.
  • Traders have rolled over 53 percent of their derivatives linked to Nifty as of 3:58 p.m. compared with the past six months’ average of 50 percent a day before the expiry, according to data compiled by Bloomberg.
    • The roll cost, or price to replace December futures and options with January, was 37 basis points versus a six-month mean of 41 basis points. In India, contracts end on the last Thursday of every month.

Analyst Notes

  • Cipla’s Stock Price Offers Good Opportunity to Accumulate: HDFC
  • Kalpataru Power to Gain from Strong Transmission Capex: Reliance

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