Mumbai: Indian shares edged higher on Tuesday led by gains in defensive and low-beta stocks such as ITC on value buying after recent declines on churning in favour of cyclicals and high-beta stocks on bets of additional government reforms.
A slew of reforms announced this month generated significant interest in India stocks with the benchmark index gaining 7.25% and foreign investors pumping in close to Rs.13,220 crore in September so far.
Although analysts expect some consolidation after the trend changing gains this month and as markets head closer to expiry of September derivatives contracts on Thursday, it is seen more as an opportunity to increase exposure in Indian stocks.
“It is definitely consolidation, as markets have lost momentum because of expiry,” Hitash Dang, vice-president at Jaypee Capital Services Ltd.
“Government measures have been extremely good, we expect the upward momentum to continue post-expiry,” he added.
India’s benchmark BSE index, Sensex, rose 0.11% to 18,694.41 points consolidating for the second day after a fast run-up in September on a heavy dose of reform announcements.
The 50-share NSE index, Nifty, rose 0.08% to 5,673.90 points although finding resistance at the 5,700 level for a third consecutive session.
Deutsche Bank AG in a report said continuing rupee gains and subdued oil prices will give a “rare sweet spot” for India, positively impacting the fiscal deficit, and give support to the the central bank, which has been waiting for inflation to cool.
India’s ruling Congress party meets later in the day to decide on changes in the Cabinet, which are expected to last until the next general elections in 2014. Traders would be watching the outcome of the meeting to finetune political expectations.
Among defensive stocks, cigarette maker ITC Ltd rose 1.86%, while Hindustan Unilever Ltd rose 1.75%.
Among other low-beta stocks, Cipla Ltd gained 1.92% on value buying after an 8.7% decline in the last eight sessions.
Shares in UB group rallied after Diageo Plc said it is in talks to buy a stake in Indian billionaire Vijay Mallya’s United Spirits Ltd, reviving an on-again, off-again courtship that would ramp up its presence in the world’s largest whisky market.
United Breweries Ltd gained 7.02%, United Spirits Ltd gained 8.89%, Kingfisher Airlines Ltd rose 8.08%, while United Breweries (Holdings) Ltd rallied 19.97%.
Barclays in a note said restructuring measures for state electricity boards “fall short of expectations”, and will serve as a bailout arrangement, rather than representing tangible reform measures.
Bharat Heavy Electricals Ltd shares ended 2.67% higher, while BGR Energy Systems Ltd and Thermax Ltd shares fell 0.32% and 0.35%, respectively.
Among other decliners, shares exposed to India’s state-owned electricity distributors fell as traders chose to “sell on news” of government bailout plan for the cash-strapped utilities saddled with more than $35 billion in debt.
Power sector lender Power Finance Corp. Ltd fell 1.13%, while Rural Electrification Corp. Ltd fell 2.65%.
Shares in Cairn India Ltd fell 3.57% after Cairn Energy was set to sell an 8% stake in its former unit for up to $940 million, in the second such deal in three months.
Shares in Axis Bank Ltd fell 2.66% on concerns over credit provided to Indonesia’s PT Bumi Resources, whose parent company Bumi Plc launched an investigation into alleged financial irregularities at its Indonesian operations. Reuters