Indian (SENSEX) stock-index futures gained, signaling benchmark indexes may rally after declining the most in a week yesterday as the rupee slumped.
SGX CNX Nifty Index futures for July delivery rose 0.6 percent to 5,857 at 10:32 a.m. in Singapore. The underlying CNX Nifty (NIFTY) Index on the National Stock Exchange of India Ltd. tumbled 1 percent to 5,811.55 yesterday. The S&P BSE Sensex fell 0.9 percent. The Bank of New York Mellon India ADR Index of U.S.- traded shares dropped 0.3 percent.
The MSCI Asia Pacific Index rebounded today from the biggest slump in two weeks on optimism company earnings growth will fuel gains in equities. Infosys Ltd. (INFO), India’s second-biggest software services company by market value, reports earnings on July 12 for the quarter ended June 30. The rupee fell to a record yesterday after a U.S. jobs report fanned concerns the U.S. Federal Reserve will reduce monetary stimulus.
“It looks like a technical rebound given that the global markets are up,” Surya Narayan Nayak, an analyst at Networth Stock Broking Ltd., said by phone from Mumbai today. “But the outlook for equities is negative given the rupee’s continuous slide. The rupee’s decline will fan inflation, widen the deficits and deter the RBI from cutting rates. The markets will track the rupee’s movement.”
A weaker currency raises the cost of India’s imported oil, which accounts for about 80 percent of its needs, likely paring the central bank’s scope to pare interest rates at its meeting on July 30. It also threatens to widen the nation’s current-account deficit and boost costs for Indian companies facing at least $ 20 billion in overseas debt repayments in the coming year, potentially wiping out the benefits of seeking lower borrowing costs.
The Sensex has dropped 3.7 percent since May 22, when Fed Chairman Ben Bernanke said the central bank will slow stimulus if the U.S. economy and job market shows sustainable improvement. That spurred investors to sell emerging-market assets, including Indian equities.
Foreign Funds
Deutsche Bank AG yesterday cut its year-end Sensex target to 21,000 from 22,500, citing prospects for a tapering of Fed’s bond-buying program, a slowdown in China and a weak rupee.
Shares of Yes Bank Ltd. (YES) may be active after Rana Kapoor, chief executive officer of the Mumbai-based lender, said yesterday the company may sell as much as 9.9 percent in fresh equity to private funds.
Foreign funds withdrew a net $ 2.95 million from Indian stocks on July 5, data from the market regulator show. Overseas investors sold a net $ 1.76 billion of the nation’s shares in June, the most since August 2011. This year’s net inflow of $ 13.5 billion is still a record for the period, according to data compiled by Bloomberg.
The Sensex has declined 0.5 percent this year and trades at 13 times projected 12-month earnings, compared with the MSCI Emerging Markets Index’s 9.5 times. The Indian index’s 50-day volatility measure, a gauge of price swings, rose to 18.5 yesterday, the highest since April 2012.
To contact the reporter on this story: Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net
To contact the editor responsible for this story: Michael Patterson at mpatterson10@bloomberg.net