Indian stocks extended last week’s gain after a recovery in global oil and commodity prices lifted metal makers and materials companies.
Tata Steel climbed the most in three weeks. Cigarette maker ITC, which has the fourth-highest weighting on the S&P BSE Sensex, had the steepest advance in two months. Dr Reddy’s Laboratories Ltd increased to a two-week high. Bank of Baroda slumped the most in eight months after reporting a surprise quarterly loss, while HDFC Bank Ltd rose to a record.
The Sensex closed 0.64%, or 163.66 points, higher at 25,653.23, while the Nifty 50 closes 0.59%, or 45.85 points, higher at 7,860.75. The reversal came as Brent crude rose to a six-month high, leading a rebound in commodities and boosting Asian shares from a one-month low. Oil extended last week’s gains as Goldman Sachs Group raised its price forecast for the second half to $50, from a March estimate of $45.
“A recovery in oil and commodities sparked a late rally in metalmakers, private banks and automobile stocks,” A K Prabhakar, the head of research at IDBI Capital Capital Market Services Ltd, said by phone from Mumbai. “Long-only funds are buying consumer stocks on hopes of a good monsoon.” The gauge completed its best week in a month on Friday amid optimism that company earnings are recovering after the worst run since the global financial crisis. Investors have also been drawing comfort from this year’s prediction for above-normal rainfall after back-to-back deficits and the passage of key economic bills in parliament.
HDFC Bank surged 1.9% to Rs1,162.80, while Bank of Baroda tumbled 8.3% to the lowest level since March 29. The lender posted a fourth-quarter loss of Rs32.3bn versus a profit of Rs5.98bn a year ago, according to a filing. Provisions rose to Rs68.6bn from Rs18.2bn. “Private banks will keep gaining market share versus state- run banks,” Parag Thakkar, head of institutional sales at HDFC Securities Ltd in Mumbai, said in an interview with Bloomberg TV India yesterday. Their balance sheets are cleaner and there’s more clarity on earnings.” Thakkar is also bullish on producers of agro-chemicals, which would benefit the June-September monsoon rains, forecast to be above-normal this year after two successive droughts.
Foreign investors bought $240mn of local stocks on May 13, taking this year’s inflows to $1.8bn. They invested $585mn in April after an inflow of $4.1bn in March, which was the highest in three years.
Meanwhile the rupee yesterday closed marginally weaker against the US dollar on concerns that the delay in monsoon and weak macroeconomic data could dampen the prospects of further rate cuts by the Reserve Bank of India (RBI).
The home currency closed at 66.81, down 0.05% from its previous close of 66.77. The rupee opened at 66.89 a dollar and touched a low of 66.92, a level last seen on March 23.
The monsoon is expected to arrive in Kerala on June 7, six days later than normal, the India Meteorological Department (IMD) said on Sunday.
On 12 May, the government released the Index of Industrial Production (IIP) data, which rose 0.1% in March. Retail inflation accelerated to 5.39% in April from 4.83% in March, as food inflation quickened to 6.32% from 5.21% the previous month.
India’s 10-year bond yield closed at 7.454%—a level last seen on 27 April, as compared with its Friday’s close of 7.449%. It opened at 7.455% and touched a high of 7.46%, a level last seen on 29 April.
So far this year, the rupee has weakened 1%, while foreign institutional investors have bought $1.77bn from the local equity market and sold $177 million in the debt market.