Indian equities advanced as investors cheered the central bank’s decision to transfer Rs 28,000 crore($3.9 billion) of its profits to the government, which is desperate for cash to fund populist pledges ahead of a national election.
The benchmark S&P BSE Sensex climbed 0.5 percent to 35,664.87 as of 10:09 a.m. in Mumbai, halting an eight-day decline. The NSE Nifty 50 Index gained 0.4 percent to 10,684.40.
A change in guard at the Reserve Bank of India in December was followed by a more dovish monetary policy stance and a reduction in the key interest rates earlier this month. Still, the Sensex and Nifty have dropped more than 3 percent since the rate cuts as investors await outcome of the national elections due by May. Prime Minister Narendra Modi’s re-election bid has turned out to be tougher than earlier estimated.
“Even as the RBI move was highly anticipated and priced in by the markets, the formal announcement brings some cheer,” said Sampath Reddy, chief investment officer at Bajaj Allianz Life Insurance Co. in Pune. “But looking beyond this event, election is the biggest factor as the nation stares at an uncertain outcome.”
Expect the markets to be range-bound till election results; mid-sized stocks look attractive now and over valuation is no longer a concern after the steep fall they have been through.
Buy stocks of private banks, consumer goods companies and software exporters until government and private businesses raise their spending to increase capacities.
Thirty-seven of the 50 Nifty shares and 25 of the 31 Sensex stocks rallied, paced by Bharti Airtel Ltd.’s 2.8 percent gain. The wireless carrier pared its decline over the past 12 months to 24 percent. Seventeen of the 19 sector indexes compiled by BSE Ltd. advanced, led by a gauge of property stocks.