Sensex ends 2-day drop as exporters rise on weak rupee

Stocks climbed, with the benchmark gauge halting two days of declines, as drugmakers and software exporters gained on optimism that a weak rupee will boost the value of their repatriated profits.

Sun Pharmaceutical Industries, Cipla and Lupin, the top health-care companies by market value, were among the biggest gainers on the S&P BSE Sensex. Infosys climbed to a record and Wipro rose to a one-month high. Reliance Industries, which gets 65 per cent of its revenue selling fuels abroad, gained 1.1 per cent.

 

The Sensex added 0.4 per cent to 27,931.64 at the close, after changing direction at least six times. Speculation that India is less vulnerable to a slowdown in China and the rising cost of dollar financing has made the Sensex the biggest gainer among the four largest emerging markets in the past two months.

Foreigners have bought $6.9 billion of local shares in 2015, the highest after Japan, data compiled by Bloomberg show.

 

"The kind of reaction we're seeing in China can add a lot of volatility to Indian markets but that's a near-term thing," Nitasha Shankar, vice president for equity research at Yes Securities in Mumbai, said in an interview with Bloomberg TV India. "The way our fundamental strength is playing out we should see a lot of funds returning to India."

She is recommending drugmakers and software exporters amid a weak rupee and improving demand outlook in Europe. The rupee has fallen 1.8 per cent this month as India's trade gap widened and the yuan devaluation spurred a selloff in Asian currencies.

Inflation cools
The 52 per cent plunge in Brent oil prices in the past year has helped cool India's inflation, improved government finances and allowed the central bank to cut interest rates three times in 2015. Wholesale prices declined by the most on record, data showed on Friday, and consumer-price gains were lower than estimated, data released Wednesday showed.

Global funds have still withdrawn a net $72 million from Indian equities in August, part of the $2.7 billion they've pulled from eight Asian market tracked by Bloomberg.

The Reserve Bank of India Governor Raghuram Rajan maintained the repo rate at 7.25 per cent on August 4, and said he will assess developments, including the expected increase in US rates, before cutting further. Minutes of the Federal Reserve's July meeting are due on Wednesday, which may offer clues on the timing of its first rate increase since 2006.

"Investors are betting the rupee will depreciate further if the RBI cuts rates and the Fed raises rates," Chokkalingam G, managing director at Equinomics Research Pvt in Mumbai, said by phone. "Exporters will benefit in such a scenario."

Sun Pharma rallied to a one-month high, while Cipla rose 1.8 per cent and Lupin gained the most this month. Infosys climbed one per cent to a record and Wipro gained 2.4 per cent to the highest close since July 23.