India stocks fluctuate as investors assess rally to 6-month high

Bloomberg

India’s benchmark stock index swung between gains and losses as investors assessed the recent rally that drove the gauge to a six-month high.
The S&P BSE Sensex was little changed at 38,813.79 as of 11:42 am in Mumbai, having fluctuated between an advance of 0.5% and a decline of 0.3%. The NSE Nifty 50 Index was also little changed. Both gauges have surged about 50% from March lows, setting eyes on their record levels reached in January.
“We’re seeing volatility because it is an expiry week for derivatives and it will be volatile until the end of the month,” Sanjiv Bhasin, strategist at IIFL Securities Ltd. “There is also profit booking by local mutual funds and that may continue.”
The Sensex opened higher earlier after it formed a golden cross — a technical indicator when the 50-day moving average rises above the 200-day line that some investors read as a sign of more gains to come. Surging interest from foreign buyers has helped sustain its advance, even as India contends with a contracting economy, and a continued climb in coronavirus cases.
“This is a liquidity driven rally, and until the liquidity stops you will be on a crazy rally,” said A. K. Prabhakar, head of research at IDBI Capital Market Services Ltd. in Mumbai, “Valuations are not good, so you need to pick out stocks where you see a visibility for the next 3-5 years.”
The yield on the benchmark 10-year government bond slipped five basis points to 6.12% after the central bank announced that it’s conducting special open-market operations, while the rupee dropped 0.1% to 74.41 per dollar.
India’s quarterly earnings season is nearly over, with 47 out of the 50 companies on the Nifty index having reported results. Nearly two-thirds have beaten or matched analyst estimates. Coal India Ltd., Vedanta Ltd., and Oil & Natural Gas Corp of India are due to report later this week. HDFC Life Insurance Co. replaced Vedanta Ltd. in the gauge from July 31.
Thirteen of 19 sector sub-indexes compiled by BSE Ltd. fell, led by a gauge of real estate companies. ICICI Bank Ltd. advanced 1.8%, while Nestle India Ltd. and Tata Steel Ltd. fell 1% each.