Indian small- and mid-cap stocks rebounded even as their bigger counterparts were volatile after falling the most in three months following the nation’s attack on terrorists in Pakistan.
The BSE Sensex gained 38.43 points to end at 27,865.96, while the Nifty rose 19.90 points to close at 8,611.15
The S&P BSE MidCap Index jumped the most in seven months as some investors judged the gauge’s 3.6% tumble on Thursday was overdone. The Sensex slid the most since June 24 on Thursday.
“The mood is still cautious and the only hope is that the tensions don’t escalate,” said Aneesh Srivastava, who manages $700mn as chief investment officer at IDBI Federal Life Insurance Co in Mumbai. “The economic consequences for us could be far greater if Pakistan retaliates.”
The conflict in Pakistan and increased global volatility have introduced a sobering note for the Indian markets closing out a blockbuster quarter. The Sensex capped a second quarterly advance with a 3.2% gain in the three months ending yesterday and the rupee is poised to end a five-quarter losing run. Benchmark 10-year bond yields have plunged 63 basis points, the most since the three months ended December 2014.
Local assets have rallied as foreigners bought the most stocks and bonds in the September quarter since the similar period ended March 2015, as the government took steps to boost economic growth. Speculation that slowing inflation will allow new Reserve Bank of India Governor Urjit Patel to cut interest rates at next week’s policy review have added to the optimism. IDBI Federal expects borrowing costs to fall 25 basis points by the year-end, Srivastava said.
Global investors bought Rs34.1bn of shares and their domestic counterparts were net buyers of Rs16.3bn of equities on Thursday, provisional data from the nation’s exchanges show. State-run banks bought a record amount of sovereign bonds on Thursday, taking advantage of the biggest yield jump in 13 months after the country’s army said it attacked terrorist camps in Pakistan. Maruti Suzuki India, the nation’s largest carmaker, is the top-performing Sensex stock in the September quarter with a 31% rally. Bharti Airtel and Wipro were the biggest decliners.
Alkem Laboratories tumbled as much as 8.3%. The pharmaceutical company said it received an inspection report from the US Food and Drug Administration that highlighted several shortcomings that had to be addressed at its factory.
Meanwhile the rupee yesterday strengthened against the US dollar, as the government tries to contain military tensions.
The rupee closed at 66.61 against the US dollar, up 0.37% from its previous close of 66.86. The home currency opened at 66.82 and touched a high of 66.57 a dollar.
Traders are cautious ahead of the Reserve Bank of India’s (RBI’s) bi-monthly policy next week. The monetary policy panel is to meet on October 3-4 and the decision will be published on website on October 4 at 2.30pm. According to Bloomberg’s analyst poll estimates, RBI may not cut rates on October 4.
“Yesterday (Thursday), we saw weakening of rupee after the news about the surgical strikes by the Indian Army. This is getting wound down with markets getting back to global trends,” said Anindya Bannerjee, an analyst with Kotak Securities.
India’s fiscal deficit during the five months to August was Rs4.08tn, or 76.4% of the budgeted target, for the fiscal year ending in March 2017, government data showed yesterday. The fiscal deficit was 66.5% of the full-year target during the same period a year ago.
The benchmark 10-year government bond yields closed at 6.817% from Thursday’s close of 6.863%. Bond yields and prices move in opposite directions.
The rupee is down 0.67% till date this year, while foreign institutional investors have bought $7.54bn in equity and $253.90mn in debt markets.
Asian currencies declined as regional equities slid amid increasing concerns over Deutsche Bank’s finances. The Indonesian rupiah was down 0.54%, Malaysian ringgit 0.37%, Philippines peso 0.32%, South Korean won 0.21%, Japanese yen 0.15%, Chinese offshore 0.09%, Chinese renminbi 0.07%. However, the Taiwanese dollar was up 0.09%.