Stocks in India Climb to Record on Robust Earnings, Global Rally
Indian stocks were on track to break above an all-time high reached in October 2021, as robust corporate earnings and a return of foreign investors bolsters one of the world’s top-performing major markets of the year.
(Bloomberg) -- Indian stocks jumped to an all-time high as strong corporate earnings and a return of foreign investors bolsters one of the world’s top-performing major markets of the year.
Joining a global rally sparked by a softer-than-expected US inflation reading, the S&P BSE Sensex Index jumped 2% to close at 61,795.04 on Friday, eclipsing a previous record reached on Oct. 18 last year. The NSE Nifty 50 Index climbed 1.8%. Of the 47 Nifty firms that have announced September-quarter results so far, 32 have met or beaten analysts’ estimates.
Equities in India have staged a solid rebound from this year’s lows in June as foreign funds slowly return to the market following a record $33 billion exodus, and earnings boost investors’ faith in the economic recovery. While a stronger dollar has weighed on most emerging-market peers, Indian stocks have also been aided by an unprecedented retail investing boom brought about by the pandemic.
The Sensex’s gain of 6.1% this year has put it on course for a seventh straight annual advance. That compares with a loss of more than 24% in the MSCI Emerging Markets Index. The MSCI All-Country World Index is down about 19% in 2022.
“In all the years that I have been watching the Indian equity markets, I have never seen such strong domestic confidence in the economy, in markets in such challenging global conditions,” said Gary Dugan, chief executive officer of the Global CIO Office. “Companies have a strong urge to invest in their own country and domestic investors are showing their confidence by continuing to invest in their local market.”
Local investors plowed about $1.1 billion into Indian stock funds in October, marking a 20th straight month of net inflows. Meanwhile, foreign investors have bought a net $2.5 billion of Indian shares so far this quarter, paring outflows for 2022 to about $20 billion.
“Investors are positive about the India growth story, which is driving markets higher despite several headwinds on the external front,” said Shrikant Chouhan, an analyst at Kotak Securities Ltd.
‘Key Destination’
India recently overtook the UK to become the world’s fifth largest economy. Gross domestic product is forecast to expand 7.0% in fiscal year 2023, according to a survey conducted by Bloomberg News.
The equity market and corporate earnings have withstood volatile global commodity prices, a major headache for the energy import-dependent country. While that remains crucial, the outlook for stocks also depends on trends in foreign flows and how investors respond to further policy tightening by the Reserve Bank of India.
The central bank will likely quicken the pace of interest rate hikes at its next two scheduled meetings to contain inflation, according to Goldman Sachs Group Inc. economists. It has raised the key rate by 190 basis points since May to 5.9%.
Friday’s jump came amid a global equities rally as a softer-than-expected US inflation print spurred bets that the Federal Reserve will step back from its aggressive rate hikes, and as China eased some of its stringent Covid restrictions.
“There is a lot of global capital that is still looking to be deployed in equity and India will be key destination,” said Abhay Agarwal, a fund manager with Mumbai-based Piper Serica Advisors Pvt.
--With assistance from .
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