Indian stocks climbed, extending last week’s advance, as overseas funds remained net buyers of local assets.
Companies sensitive to interest rates, such as metal producers and makers of consumer durables, led the gains on the benchmark indexes. The Reserve Bank of India last week unexpectedly reduced borrowing costs to more than a five-year low.
“There is a strong shift towards interest-rate sensitive sectors after last week’s rate cut,” said Ashish Kukreja, chief executive officer at Mumbai-based Craft Financial Advisors Pvt. “Any fall in share prices will be bought into as India’s fundamentals remain strong.”
Investors are focused on the quarterly earning season starting this week and the monthly inflation data due on Thursday and Friday. Volumes on the NSE Nifty 50 Index were 36% below average as Indian markets are closed Tuesday and Wednesday for public holidays.
Investors are also keeping an eye on the US presidential elections next month as policies of the world’s biggest economy are likely to impact flows to emerging markets, including India. Global funds have bought $7.8bn of Indian shares this year, more than twice the $3.3bn they invested in 2015, data compiled by Bloomberg show. The inflows have helped the Sensex rebound 23% from a low reached in February.
“Hillary Clinton’s election will be positive for India and emerging markets as a whole as it would lead to some continuity of the current administration’s economic policies,” said Nikhil Johri, chief investment officer at Trivantage Capital Management India Pvt in Mumbai after Clinton and Donald Trump sparred in their second presidential debate.
The Sensex is valued at 16.1 times projected 12-month earnings, while the MSCI Emerging Markets Index trades at a multiple of 12.5, data compiled by Bloomberg show. Tata Steel Ltd was the best performer on the Sensex, rising to its highest level since December 2014. The Sunday Times reported the company may merge its European unit with Thyssenkrupp. National Aluminium Co Ltd jumped 6.7%, while Vedanta Ltd, the largest copper producer, rose to its highest price since May 2015. Hindalco Industries Ltd gained 1.7%. Metal producers are gaining amid speculation the government may intervene through anti-dumping duties and minimum import price rules to safeguard producers, according to Craft Financial’s Kukreja. Repco Home Finance Ltd plunged the most in a year after the Central Bureau of Investigation conducted searches at the homes of chief executive officer R Varadarajan and other executives related to preclosure charges. Shares related to consumer spending advanced on optimism the ongoing festival season will boost sales. Asian Paints Ltd gained 2.2% and Nilkamal Ltd, a manufacturer of plastic furniture, jumped 3%. PC Jeweller Ltd soared 7.2% to a record, while Gitanjali Gems Ltd rallied 5.2% to a 27-month high.
Meanwhile, the Indian rupee strengthened by 16 paise to 66.53 against a US dollar from its previous close of 66.69 to a greenback.