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Business News/ Market / Stock-market-news/  Sensex reverses losses in late trade as Coal India rallies
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Sensex reverses losses in late trade as Coal India rallies

A late rally in resources companies and metal producers helped Sensex erase earlier losses and close at a seven-month high for second time this week

The Sensex gained 0.5%, or 129.21 points, at 26,843.14 in Mumbai, as some investors bought into the intraday loss of 0.3%. Photo: Aniruddha Chowdhury/MintPremium
The Sensex gained 0.5%, or 129.21 points, at 26,843.14 in Mumbai, as some investors bought into the intraday loss of 0.3%.

Photo: Aniruddha Chowdhury/Mint

Mumbai: A late rally in resources companies and metal producers helped the benchmark gauge erase earlier losses and close at a seven-month high for second time this week.

Coal India Ltd, the world’s biggest producer of the fuel, and Tata Steel Ltd were the biggest gainers on the S&P BSE Sensex. Axis Bank Ltd rose to its highest price since October, while Hindustan Unilever Ltd gained for a second day. Drugmakers Sun Pharmaceutical Industries Ltd, Lupin Ltd and Dr Reddy’s Laboratories Ltd were among the worst performers on the gauge

The Sensex gained 0.5%, or 129.21 points, at 26,843.14 in Mumbai, as some investors bought into the intraday loss of 0.3%. A faster-than-anticipated economic expansion, a recovery in company profitability and forecast for above-average rainfall after back-to-back droughts has bolstered confidence in $1.4 trillion stock market. The index jumped 4.1% last month, the most among Asian indexes.

“There may be small corrections in the markets, but the larger story remains intact as earnings are showing a smart turnaround and the monsoon outlook is positive," Deven Choksey, managing director of K.R. Choksey Shares and Securities Ltd, said in an interview to Bloomberg TV India in Mumbai. “Every dip is a buying opportunity."

Earnings revive

66% of the companies in the NSE Nifty 50 index posted earnings in the March quarter that exceeded or matched estimates. This compares with 52% in the three months ended December, data compiled by Bloomberg show. Sales for Sensex companies rose 7% year-on-year after five straight quarters of declines, the data show.

Official data this week showed the nation’s world-beating economic growth accelerated a faster-than-estimated 7.9% in the March quarter. The figures cemented the nation’s position as a bright spot among emerging markets as China slows while Russia and Brazil see contractions. Growth prospects will depend on how the monsoon pans out. The country is relying on a return to normal rainfall after two back-to-back droughts to increase crop output, help keep food prices in check and ease a drinking-water shortage.

Central bank governor Raghuram Rajan said last month that expectations a good monsoon will boost food output may help temper inflation after a jump in April. Higher farm output may also be a political boon for Prime Minister Narendra Modi, who has sought to counter rising discontent in villages before key state elections with a pledge to double farmer incomes by 2022.

Consumption outlook

“The narrative on the Modi government will change over the next few months for one because the earnings cycle is turning," Ridham Desai, head of India research at Morgan Stanley, said in an interview with Bloomberg Quint in Mumbai. “People were looking at the earnings cycle and thinking the government hasn’t done enough work. Consumption in India is about to turn up sharply in the next 12 to 18 months." Desai said he’s bullish on consumer-discretionary companies.

Coal India rallied to its highest level since 11 March. The shares were raised to neutral from underweight at JPMorgan Chase and Co.

The gains helped a gauge of state-run companies climb to its highest level since 27 April. Engineers India Ltd was the best performer on the gauge with a 6.78% surge. NHPC Ltd, a generator of hydro-power, rose for a third day.

Tata Steel advanced 2.6%, taking this year’s gains to 31%. Axis Bank gained 2.14%. HUL added 1.62%.

The Sensex has climbed 2.8% so far this year and is valued at 16.6 times 12-month projected earnings, compared with a multiple of 11.9 for an index of emerging markets. Bloomberg

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Published: 02 Jun 2016, 09:41 AM IST
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