Mumbai: Indian stocks climbed amid speculation the biggest loss in two weeks undervalued earnings prospects, and after emerging market nations pledged to support the International Monetary Fund (IMF).
The BSE’s Sensex rose 0.9% to 16,859.80 at the 3.30pm close in Mumbai. The gauge slid 1.4% on Monday, the most since 1 June. ITC Ltd led gains among consumer staples companies, rising to a record on speculation that earnings will be sheltered from slowing economic growth. Reliance Industries Ltd, owner of the world’s largest refining complex, surged the most since 30 March.
The Sensex’s valuation sank on Monday to 13 times estimated profit after the central bank unexpectedly refrained from cutting interest rates as the impact of Europe’s debt crisis fans through Asia and dominates the agenda of a Group of Twenty (G-20) summit in Mexico. India and China pledged to contribute to the IMF to help protect the world economy from the crisis.
Sensex at closing
“Valuations are definitely attractive for someone looking at the longer term,” said Kishor Ostwal, managing director of CNI Research (India) Ltd, a publicly traded equities research provider in Mumbai. “In the short term, we will see this volatility due to global and domestic macroeconomic concerns. Stimulus from emerging and developed nations will give a temporary respite to investors. Investors are cautious and they prefer the safety of defensive stocks like consumers and drugmakers.”
Indian markets rallied on Monday on hopes of fiscal measures from the government. Mint’s Lisa Pallavi Barbora takes us through the day’s winners and losers.
The Sensex’s valuation sank to a three-year low of 12.4 times estimated earnings on 23 May. The gauge has fallen 8.5% from this year’s high on 21 February on concern slowing economic growth will hurt corporate profits. Prime Minister Manmohan Singh is grappling with an economy hobbled by a record trade deficit, a budget shortfall that has exceeded targets, corruption scandals, and coalition infighting that has stymied his efforts to lure more foreign investment.
Emerging countries boosted their pledges to the IMF’s global firewall, nearly doubling the fund’s resources to $456 billion, at a G-20 summit in Mexico dominated by the global effort to restore confidence in the euro.
The S&P CNX Nifty Index on the National Stock Exchange added 0.8% to 5,103.85 and its June futures settled 1.1% higher at 5,114.30. India VIX, which measures the cost of protection against losses in the Nifty, plunged 5.2% to 21.43. The BSE-200 Index increased 0.8% to 2,059.92. Combined trading volume on India’s top two exchanges was 768 million shares on Monday, 15% less than the 12-month daily average of 907 million.