Indian stocks rose in the last hour of trade, tracking a rally in European shares before the US Federal Reserve’s policy review, as lenders and drugmakers advanced.
ICICI Bank, the country’s biggest private lender, was the top gainer on the S&P BSE Sensex. Drugmakers Cipla and Lupin climbed for a second time this week. ITC, the largest cigarette maker, increased the most in two weeks. Infosys, the second-largest software services provider, rose for the first time in three days.
The Sensex advanced 0.5% to 24,682.48 at the close in Mumbai, after dropping as much as 0.8% earlier. European stocks climbed, Asian equities fell and the dollar strengthened against most major currencies before a Federal Reserve policy review that may shed light on the timing of US interest-rate increases.
“European markets climbed and we followed as nobody wants to get caught on the wrong foot,” Paras Bothra, vice president of equity research at Ashika Stock Broking, said in an interview from Mumbai. “Traders are positioning for some positive news from the Fed. Our markets are also taking comfort from the good foreign fund inflows this month.”
Global markets are being swayed by divergent monetary policies in the world’s leading economies. While Fed funds futures show the odds of a US rate increase by the end of June have shot up to 54% from about 6% in the past month, easing in China and last week’s announcement of unprecedented stimulus by the European Central Bank have helped claw-back the bulk of 2016’s stock-market losses.
“The amount of reliance on central banks globally is not being matched by government actions,” Shiv Puri, managing Director at TVF Capital Advisors, said in an interview with Bloomberg TV India yesterday. “The big risk is that the market may not give central bankers credibility.”
In India, equities have risen in all but two days this month after Finance Minister Arun Jaitley in his February 29 budget pledged to further cut the fiscal deficit, stoking speculation of an interest-rate cut by the central bank. Reserve Bank of India Governor Raghuram Rajan said over the weekend the central bank was “comforted” by the government’s plan to shrink the budget deficit to 3.5% of GDP while telling reporters to “wait and see” how that feeds into monetary policy. He is due to review policy on April 5.
ICICI Bank rose to its highest level since January 29, paring this year’s decline to 13%. Cipla added 1.1%. Lupin climbed 1.6% after plunging 7.8% on Tuesday.
ITC increased the most since March 1. Infosys had the steepest climb since March 2.
The Sensex has risen 7.3% this month and trades at 15.1 times 12-month projected earnings after global funds turned net buyers. Foreigners bought $188mn of domestic shares on March 14, paring this year’s outflows to $1.2bn.
Meanwhile the rupee erased all the morning losses and closed stronger against the US dollar yesterday, after the local equity markets closed in the green.
The currency closed at 67.24, up 0.22% from its previous close of 67.39. The rupee opened at 67.34 a dollar and touched a high and a low of 67.22 and 67.45, respectively in intraday trade.
Since the beginning of this year, the rupee has lost 1.65%, while foreign institutional investors have sold $1.20bn in local equity markets and $1.45bn in debt markets.
Bond yield fell for the fifth consecutive session after the Reserve Bank of India (RBI) said that it is planning to buy more domestic debt via open market operations on March 17 and inflation eased at a faster-than-expected pace.
Meanwhile, India’s 10-year bond yield closed at 7.574%, a level last seen on October 19, 2015, as compared with its Tuesday’s close of 7.582%.
Asian currencies closed lower. Indonesian rupiah was down 0.78%, South Korean won 0.47%, Japanese yen 0.33%, China offshore 0.16%, and China renminbi 0.1%. However, Thai baht was up 0.28%.
The dollar index, which measures the US currency’s strength against major currencies, was trading at 96.85, up 0.23% from its previous close of 96.633.