Drugmakers and consumer companies advanced, outweighing declines in software makers, as investors sought the safety of defensive shares amid a rally that lifted the benchmark index to an 18-month high.
Sun Pharmaceutical Industries climbed the most since May 27, while Aurobindo Pharma and Lupin rose at least 2.5%. A gauge of health-care stocks increased to its highest level this year. Hindustan Unilever rallied to the highest price since March 2015, and Maruti Suzuki India climbed to a record.
India’s benchmark indexes are trading near their record highs after rebounding 27% from a low in February. The rally has pushed up the Sensex’s valuation to the highest level since January 2011. In comparison, the index of drugmakers has declined this year after a wave of US FDA sanctions in 2015 soured the sentiment for health-care companies.
“Investors are seeking safety in drugmakers as they have not participated in this rally,” Nilesh Dedhia, director at NTD Trading, said by phone from Mumbai. “Software stocks will continue to drag because of weak earnings visibility. Dedhia said he’s advising clients to book some profits “as valuations have run ahead of fundamentals.”
A gauge of technology stocks slid to the lowest level in 14 months after Tata Consultancy Services said that some of its US clients are holding back discretionary spending on applications used in financial services. Shares of Asia’s most valuable software company fell the most since October 2014, and are set for the biggest weekly loss since February.
Rivals Infosys and Wipro were also among the worst performers on the Sensex.
Slowing industry growth, a transition into digital services and the economic uncertainty around Britain’s decision to depart the European Union have taken the sheen off Indian IT services firms. Mindtree on Tuesday pared its revenue guidance for the current quarter, citing project cancellations. In July, Infosys slashed its annual sales forecast, sending its shares down by the most in a single day since April 2013.
“Guidance downgrades from software managements will continue to play spoilsport as long as earnings visibility remains low,” Kaushik Dani, a Mumbai-based fund manager at Karvy Stock Broking, said by phone.
The S&P BSE IT Index has retreated 8.1% this year, while the Sensex has rallied 11%. The software gauge hasn’t posted an annual loss since 2011. Aurobindo Pharma rose to a four-month high; drugmaker plans to raise $300mn to $400mn and may look selling shares to large investors or private equity funds, ET Now reported in Twitter posts, citing officials it didn’t identify. 
Yes Bank declined for a second day, losing 5.2%. The lender deferred a $1bn share sale to institutional investors, citing volatility in trading, according to a filing released after trading ended. The stock rose to a record on Monday. 
Foreigners bought $340mn of local equities this week, taking the year’s inflow to $6.4bn, the most in Asia after Taiwan and South Korea.