Indian stocks rise after vaccine report lifts Asian equities

Bloomberg

Indian stocks advanced, tracking a regional rally after early vaccine results sparked speculation economies could rebound quickly.
The S&P BSE Sensex added 1.6% to 30,514.44 in Mumbai, while the NSE Nifty 50 Index gained by a similar magnitude. Both measures are set to snap three days of losses, their longest losing streak in a month.
“The possibility of a vaccine will bring temporary relief to the market,” said Abhimanyu Sofat, head of research at IIFL Securities Ltd. in Mumbai. “Overall challenges of reviving the economy after the lockdown will continue to impact prospects for the market.”
While extending its lockdown to May 31, India eased curbs on some businesses, driving a surge in fuel sales in the first half of May from a month earlier as some commerce resumed. Still, the economy is headed for its worst ever recession, Goldman Sachs predicts.
India has 100,328 Covid-19 infections and 3,156 deaths, according to data from John Hopkins University. Government stimulus equivalent to 10% of the economy unveiled since February may fall short of tackling the near term challenges posed by the pandemic, strategists forecast.
Of the 19 Nifty 50 companies that have reported March quarter results so far, only five have beaten estimates. Bharti Airtel Ltd. posted a fourth-straight quarterly loss after markets close.
17 of 19 sub-indexes compiled by BSE Ltd. advanced, led by a gauge of telecom companies. HDFC Bank Ltd. gave the biggest boost to the Sensex, while Bharti Airtel was the steepest gainer with a 3.9% advance.

India’s oldest equity quant fund outperforms most of its peers
India’s oldest equity quant fund that offered lackluster returns for years outperformed most of its peers in 2020 amid the decade’s worst market rout. The secret lies in its investment model.
The 12-year-old Nippon India Quant fund, which is also among the nation’s smallest, dropped about 15% this year, compared to a 27% decline for the benchmark S&P BSE Sensex. When India shut down its economy to check the spread of coronavirus, the fund fared better than nine out of 10 equity mutual fund plans, while the sector as a whole clocked an average loss of about 19%, data compiled by Bloomberg shows.
Nippon’s model places half of the emphasis on growth and quality factors while picking stocks, Ashutosh Bhargava, who manages the $2.8 million fund said in an interview.
Since the lockdown started in March, the fund had increased investments in stocks of IT companies and consumer goods makers. However, once valuations for consumer-oriented companies reached historic highs, the model dropped them in favor of pharmaceutical manufacturers.
Even as profit expectations got smashed due to the pandemic, the Nippon India funds model fared better as it didn’t have earnings estimates in its quantitative model, Bhargava said. Just five of the eighteen Nifty 50 companies that have reported quarterly results so far this season have beaten analyst estimates.
Quality and growth measure how efficiently a company uses its capital, and how fast it increases profit. The quant fund’s model placed a 30% weight for momentum, and at 20%, value is the least influential factor. Momentum strategy bets on past winners, and value compares the relative cost of stock with historical data.
Bhargava’s fund was established in 2008 as the Reliance Quant Fund, the first of its kind in India, and averaged an annual return of about 1.8% over the past five years, compared with about 3.1% for the Nifty. There are only a handful of quant funds in India, and Nippon’s rivals Tata Asset Management Ltd. and DSP Investment Managers Pvt., have launched theirs in the last 12 months.
“Any fund banking on quality has done relatively better,” said Arun Kumar, head of research at FundsIndia.com in Chennai. “Fund managers are increasingly seeing quality as the first filter, and don’t mind paying a high price for little growth.”