Indian equities climbed the most in 10 days, led by automakers, as Asian stocks ended a six-day run of losses after investor expectations for an US interest-rate increase eased and foreigners turned buyers of local shares for the first time in four days.
The gains helped the S&P BSE Sensex and the NSE Nifty 50 Index pare this week’s loss, the first in three weeks. Reports on Thursday showed US factory output fell more than forecast, while retail sales unexpectedly slid, sending the odds for a rate increase from the Federal Reserve next week to below 20%.
The chance of an increase in borrowing costs this year has slipped below 50% for the first time in a month.
The broader NSE Nifty ended 0.43% higher at 8,779.85, after rising as much as 1.20% earlier in the session, while the benchmark BSE Sensex closed up 0.66% at 28,599.03, after gaining up to 1.29% earlier in the day.
“Data shows that the US economy is still weak and a rate hike can happen only later,” said CA Rudramurthy, head of research at Vachana Investments in Bengaluru. “There are no negatives for the Indian markets right now, except the recent uncertainty about the Fed hike.
We expect the liquidity-driven rally to continue.” Foreigners bought $52mn of shares on Thursday after pulling $210mn in the previous three sessions as demand for risk assets cooled amid concern central banks are reluctant to boost stimulus. Foreigners have bought $6.2bn of Indian equities this year, the most in Asia after Taiwan and South Korea.
Meanwhile the rupee yesterday strengthened against the US dollar on improvement in trade deficit data. Gains in the local equity and Asian currencies markets also helped the currency.
The rupee closed at 66.985 per dollar, up 0.06% from its previous close of 67.03. The domestic currency opened at 66.87 per dollar and touched a high and a low of 66.84 and 67.0325, respectively.
India’s merchandise exports contracted by 0.3% from a year ago to $21.5bn in August, while imports shrank 14.1% to $29.2bn. Trade deficit fell to $7.67bn against $12.40bn a year ago and $7.76bn a month ago.
The current account is likely to swing to a $3.3bn surplus in the April-June quarter, its first since 2007, according to the median of 10 economist estimates in a Bloomberg survey. The data is expected to be released by the Reserve Bank of India in September.
Asian currencies were trading higher after weak US data reduced the already low chance of an interest rate increase by the Federal Reserve at next week’s meeting.
US August retail sales and manufacturing output fell more than expected, according to data released on Thursday. The lacklustre reports prompted the Atlanta Fed to lower its third-quarter gross domestic product estimate to a 3% annual rate, from 3.3% earlier.
The Taiwanese dollar was up 0.55%, South Korean won 0.48%, Japanese yen 0.22%, Malaysian ringgit 0.17%, Indonesian rupiah 0.15% and Chinese renminbi 0.07%.
However, the Philippines peso was down 0.18%, Thai baht 0.14% and Singapore dollar 0.07%.
The 10-year bond yield stood at 6.868% compared with Thursday’s close of 6.883%. Bond yields and prices move in opposite directions.
The rupee is down 1.24% till date this year, while foreign institutional investors have bought $6.24bn in equity and sold $564mn in debt markets.
The dollar index, which measures the US currency’s strength against major currencies, was trading at 95.493, up 0.22% from its previous close of 95.288.
The BSE Sensex closed up 0.66% to 28,599.03 points yesterday