Indian stock-index futures gained after benchmark indexes fell for a third day yesterday following the federal budget. Infosys Ltd. (INFO) reports earnings and the government releases monthly industrial output data today.
SGX CNX Nifty Index futures for July delivery rose 0.2 percent to 7,562.5 at 10:06 a.m. in Singapore. The underlying CNX Nifty Index lost 0.2 percent to 7,567.75 yesterday. The S&P BSE Sensex (SENSEX) declined 0.3 percent. The gauge has fallen 2.8 percent since climbing to a record high on July 7.
Prime Minister Narendra Modi’s two-month-old government unexpectedly kept India’s budget-deficit target unchanged, and unveiled plans to “overhaul” food and fuel subsidies. Modi faces the challenge of boosting economic growth from near a decade low while narrowing one of Asia’s widest deficits. The central bank has sought to curb a subsidy bill that has grown fivefold over the past decade, while keeping interest rates high amid Asia’s fastest inflation.
“A slowly upping economic cycle, market and capital risk appetite and a budget that meets (not beats) high expectations is moderately market positive,” Citigroup Inc. analysts Aditya Narain and Jitender Tokas wrote in a note dated today.
The key beneficiaries from the budget will be banks and financial services, infrastructure companies, cigarette makers and property stocks, Citigroup said.
Morgan Stanley lifted its June 2015 target for the Sensex by 9 percent to 28,800 in a note e-mailed today. That’s a 14 percent gain from yesterday’s close.
The deficit will narrow to 4.1 percent of gross domestic product in the year through March 2015, Arun Jaitley said yesterday. Still, the budget lacked details on how that reduction will be achieved, Moody’s Investors Service said in a statement yesterday.
Measures to spur growth, such as infrastructure development and allowing higher foreign direct investment in defense, are “unlikely to lead to a significant acceleration from current levels unless accompanied by a decline in inflation, interest rates and regulatory constraints on investment,” Moody’s said.
“We believe Indian equities may underperform in the near term,” BNP Paribas SA analysts led by Manishi Raychaudhuri wrote in a note dated today. “Over the past seven years, Indian stocks have underperformed Asia ex-Japan in 70 percent of post-budget episodes.”
Infosys Ltd., India’s second-largest software services company, may report today that profit rose 12 percent to 26.5 billion rupees ($ 440 million) in the quarter ended June, according to the median of 33 analyst estimates compiled by Bloomberg.
Data today may show industrial output expanded 3.5 percent from a year earlier in May, compared with 3.4 percent in April, according to a Bloomberg survey of 33 analysts.
International investors bought a net $ 138 million of Indian shares on July 9. They have poured $ 11 billion into local equities this year, the most among eight Asian markets tracked by Bloomberg, on expectations Modi would introduce policies to revive growth.
The Sensex has jumped 20 percent this year and is valued at 15.5 times projected 12-month profits, compared with the MSCI Emerging Markets Index’s multiple of 11. The Indian gauge’s valuation rose to 16 times on July 7, the most expensive since April 2011.
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