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Economic green shoots lift Indian shares as bond issuers emerge

A report after market Friday showed factory output expanded the most since Feb, the latest indication of recovery from one of the world’s worst recessions amid the pandemic (Photo: Bloomberg)Premium
A report after market Friday showed factory output expanded the most since Feb, the latest indication of recovery from one of the world’s worst recessions amid the pandemic (Photo: Bloomberg)

Oil, gas and metal stocks climbed, with industry measures of the so-called cyclical shares leading gains among India’s sub-indexes. Burger King India almost doubled in its Mumbai trading debut from its IPO price

Indian shares that tend to do well during times of economic growth rose ad more companies offered dollar bonds after stronger factory output added to signs of a rebound.

Oil, gas and metal stocks climbed, with industry measures of the so-called cyclical shares leading gains among India’s sub-indexes. Burger King India Ltd. almost doubled in its Mumbai trading debut from its initial public offering price. Two companies started marketing dollar notes.

A report after market Friday showed factory output expanded the most since February, the latest indication of recovery from one of the world’s worst recessions amid the pandemic. Later today, a release will probably show inflation eased in November, while remaining above the central bank’s 2%-6% target range, according to economist estimates in a Bloomberg survey.

“I wouldn’t mind having a reasonably large allocation to cyclicals," said Kenneth Andrade, chief investment officer at Old Bridge Capital Management Pvt. in Mumbai. “Valuations in commodity related stocks are very much in your favor right now."

The deployment of a Covid-19 vaccine in the US from this week buoyed regional sentiment toward cyclicals, with an Asia-Pacific equity gauge adding 0.3%.

Adani International Container Terminal Pvt. and a unit of JSW Steel Ltd. are seeking to price dollar notes, according to separate people familiar with the matter. Vedanta Resources Ltd. sold dollar junk notes last week, and if the two others price, that would be the most Indian issuers since February.

Indian dollar notes have returned 1.1% so far this month, the most in Asia, and topping an average 0.3% for the region, according to Bloomberg Barclays indexes. While dollar hedging costs for local companies recently rose to a 7-month high, they’ve edged down in recent days.

“The worst for India’s economy seems over," said A.S. Thiyaga Rajan, a senior managing director in Singapore at Aquarius Investment Advisors Pte. “Rare offerings from Indian issuers in the recent past has created an appetite for dollar bonds from local companies."

One year-forward price-to-earnings ratios for the BSE Oil and Gas industry sub-index and a gauge of metal companies, of about 16 and less than 15 respectively, were about half that of the almost 29 level of the Sensex.

There are still risks. With about 60,000 confirmed coronavirus cases on Saturday marking India’s steepest single-day jump since October, the nation still has the world’s second-worst coronavirus outbreak after the U.S.

The yield on the benchmark 10-year government bond dropped by one basis point to 5.89%, while the rupee strengthened 0.1% to 73.5638 per U.S. dollar.

The numbers

  • Fourteen of 19 sector sub-indexes compiled by BSE Ltd. advanced, led by a gauge of metal companies
  • Eighteen shares on the Sensex index rose, while 12 fell
  • ICICI Bank Ltd. contributed most to the index advance, and added 1.5%; Oil and Natural Gas Corp. was the biggest winner, advancing 3.6%


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