Indian stock-index futures dropped after the benchmark index gained the most in two weeks yesterday and U.S. lawmakers wrangled over a government shutdown in the world’s largest economy.
SGX CNX Nifty Index futures for October delivery fell 0.4 percent to 5,924 at 10:16 a.m. in Singapore. The underlying CNX Nifty (NIFTY) Index soared 2.2 percent to 5,909.70 yesterday. The S&P BSE Sensex jumped 2 percent, while its 50-day volatility measure, a gauge of price swings, increased to the highest level since October 2011. The Bank of New York Mellon India ADR Index of U.S.-traded shares rose 2 percent.
The U.S. Treasury warned yesterday that failure to raise the $ 16.7 trillion debt limit before the administration’s borrowing authority expires on Oct. 17 may result in a recession as bad or worse than the 2008 financial crisis. The partial closing of the U.S. government for one week would shave 0.1 percentage point from economic growth, according to the median of 40 estimates in a Bloomberg survey of economists.
“We expect the market to respond to developments related to the U.S. budget deadline and debt ceiling, and there could be volatility around these events,” Dipen Shah, head of private client group research at Kotak Securities Ltd., wrote in an e-mail yesterday.
Shares of state-run lenders, including State Bank of India, may be active after the Indian (SENSEX) government decided to increase capital infusions to boost lending to selected segments like autos and consumer durables.
Jet Airways (India) Ltd. (JETIN), the nation’s largest publicly traded carrier, may move after Abu Dhabi-based Etihad Airways got backing from the Indian government to invest in the company. The approval paves the way for the first share sale by an Indian airline to a foreign carrier since investment restrictions were eased last year.
International investors sold a net $ 13.8 million of local stocks on Oct. 1, data from the market regulator showed yesterday. That pared this year’s inflow to $ 13.4 billion, the second-highest among 10 Asian markets tracked by Bloomberg.
Overseas funds bought a net $ 2 billion of local shares in September, the first monthly net inflows since May, after new Reserve Bank of India Governor Raghuram Rajan announced plans to boost the financial industry and support the rupee, and the U.S. Federal Reserve decided to keep stimulus.
The Sensex has risen 2.5 percent this year and is valued at 13.7 times estimated 12-month profits, compared with the five-year average of 14.1 times. The MSCI Emerging Markets Index is trading at 10.5 times.
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