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Mumbai - Automakers and consumer companies helped Indian stocks to a third day of gains as global funds remained buyers despite the prospect of US borrowing costs rising.
The benchmark gauge is poised for the longest run of monthly advances in two years.
Foreigners bought a total $128m of shares on Friday and on Monday after turning sellers for three days last week before Federal Reserve chair Janet Yellen said the case for higher interest rates is getting stronger. They’ve plowed $5.9bn into local stocks since January 1, surpassing last year’s $3.3bn. That’s helped the S&P BSE Sensex rise 24% from a low in February.
“This is purely a liquidity-driven rally,” Ashish Kukreja, chief executive officer at Mumbai-based Craft Financial Advisors, said by phone.
“Investors are betting on known performers such as automakers and consumer companies, where there’s certainty of earnings and sales growth.” Kukreja said he’s telling clients to be cautious because of high valuations.
Index Change Level Highest Since Sensex +0.3% 28 434.4 July 22, 2015 Nifty +0.5% 8 785.30 April 13, 2015 S&P BSE MidCap +0.7% 13 256.12 Record level S&P BSE SmallCap +0.4% 12 669.66 Record level
Indexes tracking automakers and producers of consumer goods climbed to all-time highs amid optimism sales will rise as the government pays out past dues to its employees this week.
As many as 10 million staff and pensioners will received an additional 390 billion rupees ($5.8 billion) in their August paychecks, according to a Deutsche Bank report. Producers of appliances, two-wheeler makers and lenders would benefit the most from the extra money in the hands of consumers, the bank said.
Auto stocks were the best performers on the Sensex. Maruti Suzuki India rallied to an all-time high. Tata Motors, the owner of Jaguar Land Rover, rose to a 16-month high. Two-wheeler makers Hero MotoCorp and Bajaj Auto both advanced to record highs.
Asian Paints increased to a record. Marico, a maker of hair oils, added 1.9%, the most since August 11. RBL Bank surged 31% in its trading debut. It sold shares at 225 rupees apiece in an initial share sale.
The rebound has driven the Sensex’s valuation to 16.4 times projected 12-month earnings, near the highest level since April 2015. The MSCI Emerging Markets Index is valued at a multiple of 12.5, data compiled by Bloomberg show.
