India stocks rose as investors weighed the prospect of more government stimulus against risks as brokerage Sanford C Bernstein added to concerns about the health of the financial system, citing structural challenges for top non-state banks.
The benchmark S&P BSE Sensex gained 0.4% to 37,145.45 points in Mumbai, while the NSE Nifty 50 Index gained 0.5%. Both measures had earlier dropped as Sanford C Bernstein cut its rating on HDFC Bank Ltd and its smaller peer IndusInd Bank Ltd amid softening consumption and a decline in savings.
For HDFC Bank, counted among the best lenders in emerging markets, the brokerage flagged concerns about the growth of its unsecured consumer book including credit cards and personal loans.
The downgrades, to market perform from outperform, add to warnings by Moody’s Investors Service and Credit Suisse Group that more loans may sour in India, which has the world’s worst bad-debt pile amid a prolonged shadow-banking crisis.
India Finance Minister Nirmala Sitharaman, said after markets closed on Friday that the government will unveil more measures to revive economic growth, which slumped to the slowest pace in six years in the April-June quarter.
Seventeen of 19 sector sub-indexes compiled by BSE Ltd advanced led by a gauge of telecom companies.
Housing Development Finance Corp contributed the most to the index advance, increasing 1.1% while Yes Bank had the largest gain, rising 4.5%.
RBL Bank Ltd advanced 7.1% as ICICI Securities Ltd maintained a buy on stock.
Meanwhile the rupee yesterday strengthened to as much as 71.50 against the US dollar, but later pared gains to end marginally higher. Opening at 71.67 a dollar, the rupee traded in a range of 71.50 to 71.73 against the US dollar, as compared to its previous close of 71.72.
The rupee settled just 2 paise higher at 71.70, extending gains to the fourth day. Improved global risk sentiment lifted the rupee against the US dollar while domestic stock markets also ended higher.
Spot USD-INR has support in the range of 71.40 to 70.80 and resistance at 72.40, said HDFC Securities.
Forex traders will be looking ahead to ECB’s rate decision and US CPI, both due this Thursday, says forex advisory firm IFA Global. US Federal Reserve rate decision is also due tomorrow.
The rupee is down about 2.5% so far this year against the US dollar. So far this month, foreign investors have sold worth $671mn worth of Indian equities (net) while they bought $334mn in debt securities. HDFC Securities expects the rupee to remain volatile in the near term ahead of inflation and industrial production data, due later this week.
Global risk sentiment has improved after US and China said they will restart trade talks next month. “Though risks on US-China trade war front, Brexit and Hong Kong protests have eased somewhat, investors would be cautious as we have seen optimism fade away very quickly in recent times,” IFA Global said.
Global risk sentiment was also supported by comments from Federal Reserve chairman Jerome Powell that the US central bank would continue to act “as appropriate” to sustain the economic expansion. “With markets already having run ahead in terms of easing expectations from Fed, risks are skewed in favour of a scenario in which the Fed were to not sound as dovish,” IFA Global added.