Indian stock rally sputters amid high valuation, case rise

Bloomberg

Indian stocks were mixed, as investors weighed high valuations and surging coronavirus cases in some parts of the country against optimism that vaccines will soon provide an exit from the pandemic.
The S&P BSE Sensex was little changed at 43,924.44 in Mumbai after falling as much as 0.3%, while the NSE Nifty 50 Index also traded flat. After reaching new highs this month, the Sensex is trading at levels some technical analysts consider to be overbought. The gauge is trading at a
12-month price-to-estimated earnings multiple of about 22 times — a record high and more than two standard deviations higher than its 10-year average.
“Valuations are at a slight premium to long-term averages although macro trends and earnings recovery continue to be positive signs,”
said Gautam Duggad, head of research at Motilal Oswal
Securities Ltd.
While India’s daily coronavirus infections are down from a September peak, the country still has the world’s second highest number of cases as new infections surge in the US and Europe.
India’s $2.2 trillion market
is seen as more sensitive to vaccine-related developments than other Asian markets, feeding optimism amid signs of progress. Stocks have also been helped by better than expected results for the September quarter, with 70% of the companies on the Nifty 50 index beating or matching analyst estimates.
The yield on the 10-year sovereign bond fell one basis point to 5.86%, while the Indian rupee was steady at 74.4850 per dollar.
Eleven of 19 sector sub-indexes compiled by BSE Ltd advanced, led by gauges of capital goods and industrials; measures for IT and consumer goods firms fell.
Larsen & Toubro Ltd contributed most to the index’s advance with a 3.2% gain after saying it won an order. Tata Consultancy Services Ltd was the biggest drag on the gauge, falling 1.2%.