(Bloomberg) -- Indian shares advanced, paring the key gauge’s worst January since 2016, after the U.S. Federal Reserve’s decision to put interest-rate increases on hold raised investor optimism that capital flows to emerging-market will resume.
The S&P BSE Sensex gained 0.4 percent to 35,747.63 at 9:54 a.m. in Mumbai ahead of the expiry of monthly derivatives contracts later Thursday. For the month, the benchmark gauge is down 0.9 percent, data compiled by Bloomberg shows. The NSE Nifty 50 Index added 0.3 percent.
Stocks across Asia surged after the Fed’s dovish statement helped ease concern that policy makers would continue with plans to raise interest rates even in the face of data suggesting the world’s largest economy is cooling.
At home, Prime Minister Narendra Modi will have a last chance ahead of a national poll to win voters with possible populist spending measures as his government presents its last federal budget on Friday. Speculation is rife that Modi’s fiscal plan includes a cash transfer program for farmers entailing an additional spending of 700 billion rupees ($9.8 billion), support for small businesses and some reprieve for taxpayers.
Strategist View
- “We don’t see a major rally in stocks ahead of the budget and on the day of the expiry of monthly derivative contracts,” said A. K. Prabhakar, head of research at IDBI Capital Market Services Ltd. “Market recovery will remain anemic till tight liquidity conditions in the system ease.”
- “We expect some populist measures by the government in the budget given the elections, though investors may not like a big comprise on the fiscal deficit,” he says.
- “We feel the budget will be a non-event. Given the water-tight scenario on macro front, be it fiscal deficit, volatile crude oil prices, depreciating rupee or the stagnating indirect tax collections, there is no scope for playing to the galleries,” Dharmesh Kant, head of research at IndiaNivesh Securities wrote in a note.
- “However, some relief to farmers in the form direct benefit transfer based on land holdings, direct transfer of fertilizer subsidy on purchases made and raising of minimum support price for essential food grains may be on the cards,” he said.
The Numbers
- All 19 sector sub-indexes compiled by BSE Ltd. gained, led by a gauge of energy companies.
- Reliance Industries Ltd. and Hindustan Unilever (LON:ULVR) Ltd. gave the biggest boosts to the benchmark index.
- ICICI Bank Ltd. climbed as much as 3.1% and was the best performer on the Sensex after its former chief executive was asked to repay nine years of bonuses.
- Dewan Housing Finance Corp Ltd. dropped for a fourth consecutive session after a report its accounts are being examined by India’s Ministry of Corporate Affairs.
