Sensex rises from 20-month low as RIL jumps

Indian stocks rebounded from a 20-month low as some investors judged the recent slide that sent the benchmark index to the brink of a bear market on Monday to be excessive.

Reliance Industries Ltd, the owner of the world's largest refining complex, jumped 2.6 per cent. ICICI Bank Ltd and Axis Bank Ltd, the top private lenders, were among the best performers on the S&P BSE Sensex. Adani Ports & Special Economic Zone Ltd surged the most in five months. Larsen & Toubro Ltd rallied from near a two-year low.

The Sensex surged 1.2 per cent to 24,479.8 at the close in Mumbai. The worst start of a year since 2011 has pulled the gauge's valuation to the cheapest level in four months amid concern about China's market turmoil and the rout in commodities. The index's 14-day relative strength index dropped to 28 on Monday, below the level of 30 that some analysts say signals a rebound is imminent.

"It's a relief rally from oversold levels," Kaushik Dani, a fund manager at Karvy Stock Broking Ltd, said from Mumbai by phone. "It's difficult to be gung-ho on the market as global growth and uncertainty are still big concerns. It's best to have a stock-specific approach depending on how earnings play out." He favours shares of private-sector banks and software exporters.

Capital outflows
The Sensex trades at 14.7 times its projected 12-month profits, compared with a multiple of 10.4 for the MSCI Emerging Markets Index. The Indian gauge came within 1.5 per cent of the 20 per cent threshold of a bear market on Monday.

Foreign funds sold a net $276 million of Indian shares on Monday, taking this year's outflow to $1.1 billion. They invested $3.3 billion in 2015, the smallest inflow since 2011, as news out of China combined with the cooling in optimism surrounding prime minister Narendra Modi's economic agenda.

So far, two of the three Sensex companies that have reported earnings for the December quarter have beaten estimates. Fifty-seven per cent of Sensex companies in the September quarter posted earnings that matched or beat estimates, versus 60 per cent in June, data compiled by Bloomberg show.

ICICI Bank jumped 2.5 per cent, the most since December 21. Axis Bank rallied 5.3 per cent, the most since September 8.

Adani Ports soared 6.2 per cent, the most since August 14 and is the best performer on the Sensex on Tuesday. Larsen & Toubro surged 3.6 per cent, the most since October 5. Tata Motors Ltd, the owner of Jaguar Land Rover, climbed 4.1 per cent.