Second Day of Gains for India’s Stocks Ahead of Budget, Earnings

(Bloomberg) -- Indian equities extended gains to a second day ahead of a federal budget due later this week that will give an indication of the government's commitment to providing stimulus for a slowing economy. The advance was led by energy stocks, while drugmakers declined.

The benchmark S&P BSE Sensex climbed 0.3% to 39,816.48 at the 3:30 p.m. close in Mumbai, reversing a decline of as much as 0.5% earlier in the day. The NSE Nifty 50 Index rose 0.4% to 11,910.30.

Investors are in a wait-and-see stance ahead of the government budget due July 5 and next week's start of corporate earnings reports for the June quarter. A sluggish beginning to India's monsoon season, a crucial source of irrigation water, has weighed on local market sentiment and raised concern that consumer spending may slump among the nation's farmers.

Strategist View

• “Signs of loosening monetary policies locally and globally and hope for a fiscal stimulus by the Indian government are the key positives for Indian equities,” said Girish Pai, head of institutional equity research at Nirmal Bang Equities Pvt. in Mumbai. “Having said that, how much room the government has for stimulus also needs to be seen.”
• Erratic rainfall, a decline in consumption, a slowing global economy and a credit crunch in India are negatives that weigh on investor sentiment, Pai said. “Benchmark valuations are also on the higher side and investors are chasing only quality companies.”

The Numbers

• Fifteen of the 19 sector indexes compiled by BSE Ltd. rallied, led by a gauge of oil and gas stocks.
• Nineteen of the 31 Sensex members and 33 of the 50 Nifty stocks advanced.
• Energy behemoth Oil & Natural Gas Corp. added 2.9%, the steepest among Sensex members, halting a two-day fall. Yes Bank Ltd. slid 7.7% to its lowest level in five years after the Economic Times reported that Radius Developers defaulted on scheduled interest payments on a 12 billion rupee ($174 million) loan, citing unidentified people.
• Cox & Kings Ltd. dropped 5% to a new record after Care Ratings lowered the travel planner's debt score. The company said it's taking measures to resolve a cash flow mismatch.

Analyst Notes/Market-Related Stories

• Moody's India Unit CEO Put on Leave Amid Credit Rating Probe
• Why India's Troubled Shadow Banks Spook the Market: QuickTake
• India Shadow Banks Seek Refinance Window as Cash Woes Continue

To contact the reporter on this story: Ameya Karve in Mumbai at akarve@bloomberg.net

To contact the editors responsible for this story: Divya Balji at dbalji1@bloomberg.net, Teo Chian Wei

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