Indian stocks advanced to a 12-week high before the expiry of the monthly derivative contracts as foreign inflows into the nation’s stocks accelerated and Federal Reserve Chair Janet Yellen reiterated the case for raising US interest rates slowly.
Tata Steel and ICICI Bank, the nation’s biggest private lender, were the best performers on the S&P BSE Sensex. Lupin rebounded from a January low. Bajaj Auto, the second-largest motorcycle maker, climbed the most in two months, while Tata Motors, owner of Jaguar Land Rover, climbed for a second day.
The Sensex rallied 1.8% to the highest close since January 6, as stocks jumped around the world after Yellen signalled that weakening world growth called for a slow approach to tightening policy.
The gauge is set for its best month since January 2012, as global funds bought $3.1bn of local shares this month, the biggest inflow since March 2014.
“The markets are rising on the back of global risk-on trade and the dovish commentary from the Fed,” Chokkalingam G, managing director at Equinomics Research & Advisory in Mumbai, said in a phone interview. “Foreign inflow has been very strong this month and that’s supporting the market.
All eyes will be on the Reserve Bank of India policy meeting next week.” He is advising clients to buy engineering companies, tire-makers and some drugmakers.
Prime Minister Narendra Modi’s February 29 budget sparked a rally in India’s rupee, bonds and stocks as the government’s resolve to narrow the fiscal deficit to a nine-year low boosted investor sentiment. Data showing inflation eased to a four-month low in February also increased the odds of an interest-rate cut.
The RBI will review rates on April 5.
“The RBI and the finance ministry seem to be on the same page, and we are hoping that continues into the monetary policy as well,” Anup Maheshwari, head of equities and corporate strategy at DSP BlackRock Investment Managers, which has $5.9bn in Indian shares, said in an interview to Bloomberg TV India. “It will be exciting to see what else the RBI comes up with besides an obvious rate cut.”
Lupin rallied 5.3%, rebounding from a slide of almost 10% in the past three days. ICICI Bank rose 6.3%, ending a two-day drop. Bajaj Auto added 3% to its highest level since February 22. Tata Motors increased 4.3%.
Balrampur Chini Mills, the nation’s second-biggest sugar maker, surged 7.7% after the company said in an exchange filing it expects sweetener prices to extend a rally as production heads for a second year of decline. Production in India will drop 5% to 7% in the year beginning October 1 from about 25.5mn tonnes in 2015-16.
Other sugar mills, including EID Parry India and Bajaj Hindusthan, rallied at least 8%.
The Sensex has risen 10.2% this month and traded above its 100-day moving average yesterday. The measure is valued at 15.4 times 12-month projected earnings, compared with 11.9 for the MSCI Emerging Markets Index.
Meanwhile the rupee yesterday closed at a three-month high against the US dollar as sentiment improved after US Federal Reserve chief Janet Yellen’s comments on Tuesday.
The rupee closed at 66.39, a level last seen on January 1, up 0.23% from its previous close of 66.54. The currency opened at 66.49 and touched a high of 66.32, a level last seen on January 4.
Most Asian currencies closed higher after Yellen emphasised a cautious approach to normalising monetary policy in the light of fears about the domestic and international economy.
The Malaysian ringgit was up 1.51%, Taiwan dollar 1.17%, South Korean won 1.1%, Indonesian rupiah 1.05%, Philippines peso 0.76%, China renminbi 0.45%, Japanese yen 0.37%, Thai baht 0.25%, China offshore 0.19% and Singapore dollar 0.11%.
The rupee was also buoyed by gains in local shares. This was the fourth consecutive session in which the rupee closed higher.
The rupee has recouped most of the losses it saw earlier this year and is now only 0.36% down so far in calendar year 2016.
FIIs have turned net buyers in local equity markets so far this year and have bought $208.70mn from local equity markets and sold $852.80mn in debt markets.
Traders are now eyeing US non-farm payroll and unemployment data on Friday for further cues.