India Stocks Extend Record-Setting Rally on Vaccine-Results Boon

Stocks in India’s $2.2 trillion market joined a global rally as vaccine results fueled optimism of an exit from the pandemic after local benchmarks closed at record highs Monday.

The S&P BSE Sensex climbed 0.6% to 42,838.75 as of 9:50 a.m. in Mumbai, while the Nifty 50 rose by the same magnitude. Both gauges closed at fresh peaks Monday and have gained more than 7% so far this month.

Shares climbed in most Asian markets Tuesday after the news that avaccine being developed by Pfizer Inc. and BioNTech SE protects most people from coronavirus. India’s benchmarks advanced Monday after Democrat Joe Biden was declared the winner in the U.S. presidential election, easing uncertainty of a prolonged process in deciding a victor.

“The Pfizer news is driving positive investor sentiment, but the sustainability of this remains to be seen as it is a long way from the vaccine to the actual implementation,” said Sameer Kalra, a strategist at Mumbai-based Target Investing. “Also, while the U.S. election may have been called, the concerns over legal challenges are still alive.”

With broad-based gains rooted in the re-opening of Asia’s third-largest economy and a better-than-expected earnings season seen continuing, traders are now hunting for stocks with relatively more scope to deliver returns.

About 80% of stocks on the benchmark S&P BSE Sensex are trading above their 200-day moving average, compared with around 65% of members on the MSCI AC Asia Pacific Index.

“We are betting both on sectors that are resilient to the pandemic and those that are slightly vulnerable to it,” said Ajit Mishra, vice-president of research at Religare Broking Ltd. in Mumbai, adding that his firm has begun selectively recommending certain aviation and multiplex operators’ shares to clients. “These stocks are at a decent valuation after reopening.”

Elections and Policy

Prior to the vaccine news, the prospect of a Biden presidency led to a surge across emerging market assets as investors surmised how his trade and foreign policy might affect markets. Sumeet Rohra, a fund manager at Smartsun Capital Pte in Singapore, predicted that a potential renegotiation of the Iran nuclear deal could curb crude oil prices, a key import for India’s economy.

While India remains thesecond-worst nation in the world when it comes to coronavirus infections, the most recent reported daily case count of about 45,000 is less than half the peak in mid-September, according to data from Johns Hopkins.

Earnings have also pointed to a brighter picture than expected. Some 27 of the 40 Nifty 50-member companies that have announced results so far have beaten or matched estimates. Yet some fear the recent rally has been too fast.

“The reward-risk balance is less favorable post the sharp run-up in stock prices, but the economic recovery and low global and domestic bond yields may support valuations,” analysts at Kotak Institutional Equities led by Sanjeev Prasad wrote in a note.

Meanwhile, with the results of an election in the eastern state of Bihar due today, traders should consider liquor companies’ shares as a potential new chief minister could lift a ban on alcohol sales, said Hemang Jani, head equity strategist at Motilal Oswal Financial Services Ltd. in Mumbai.

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