Indian equities are gaining an edge in Asia as profits at roughly two-thirds of BSE 100 companies that have reported results rose 20% from a year earlier in the September quarter, according to Citigroup Inc. This marked the fastest growth in at least five quarters and beat estimates, as reported by Bloomberg. Consumer staples, steel and financials were among sectors to see earnings upgrades during the reporting season. The latest market data shows Nifty 50 trading above 23,950 level with BSE Sensex up over 200 points, extending the rally to fifth straight session led by buying in auto, metals and realty stocks. Media emerged as the top performing sector, followed by FMCG, Metal and Realty, while IT was the only major sector to close lower, falling over 1% due to weakness in global technology stocks, according to latest closing bell reports.
The improvement is putting India's $5.1 trillion market back on investors' radar after rich valuations, record foreign outflows and limited exposure to the artificial-intelligence trade soured sentiment. Since October 1, the Nifty 50 has risen 6% through Wednesday, even as the MSCI Asia Pacific Index fell 7.5%, according to Bloomberg reports. Some strategists see scope for the run of outperformance to extend if earnings upgrades broaden and overseas inflows accelerate. The Indian rupee strengthened by more than 20 paise against the US dollar, trading at 94.64 against a dollar compared with the previous session, as reported in latest market data.
Selling by global funds is also abating, with overseas investors having been net buyers of local shares for the past three weeks, after withdrawing more than $30 billion this year, as reported by Bloomberg. An acceleration in flows would add to the recent momentum, particularly if concerns over the AI trade, along with the Democrats' strong US midterm showing, prompt a rotation of capital toward laggards such as India. Continued foreign investor buying and encouraging domestic earnings also lent support to market sentiment, with broader markets witnessing stronger participation as midcap and smallcap indices advanced around 1.6%-2.08%, indicating healthy market breadth.
Earnings have been 'reasonably good' at a time when valuations have become less demanding, making India a 'pocket of resilience' in the region, said Rajat Agarwal, an Asia strategist at Societe Generale SA, according to Bloomberg. However, the 12-month forward earnings-per-share estimate for Nifty 50 members rose 1.6% during the ongoing reporting season, compared with more than 5% growth for MSCI's regional gauge, as data compiled by Bloomberg shows. The 10-year government bond yield declined 5 basis points to 7.26%, indicating improved market sentiment, while crude oil prices holding around $103 per barrel provided some relief on the macroeconomic front.
Despite the positive momentum, risks remain as high oil prices are a key concern for an economy that relies heavily on energy imports, as they threaten to stoke inflation, squeeze profit margins and hurt the rupee, which neared a record low last month, according to Bloomberg. Citi analysts Surendra Goyal and Vijit Jain noted that 'concerns on AI infra trade globally have increased, which should bring back the focus on markets like India, with decent growth and reasonable valuations post the correction', as reported by Bloomberg. Going forward, crude prices, FII flows, global developments and Q2 earnings will remain key market drivers, with volatility expected to continue but sustained foreign buying and softer crude prices could support the ongoing recovery.
