Indian stocks pause rally in Diwali session as foreign inflows support market

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Indian stocks pause Diwali rally

Highlights

Nifty 50 slips 0.18% to 24,986.4 and Sensex dips 0.04% to 80,999.4 in the one-hour Diwali Muhurat session, pausing after a 10% rally in the previous week.
Foreign portfolio investors purchase $4.89 billion in Indian shares over five sessions, including the biggest single-day investment in about six years last Thursday.
Pharma index jumps 1.7% led by Divi's Laboratories surging 7.5% on a 64% quarterly profit rise; metals rise 0.4% as Tata Steel gains 2.1% after strong earnings.

Diwali trading session reflects pause after sharp gains

As reported by Reuters, India’s benchmark indexes close little changed in the one-hour Muhurat trading session on Sunday, with the Nifty 50 down 0.18% at 24,986.4 and the Sensex off 0.04% at 80,999.4.

The consolidation follows a rally of more than 10% across the previous seven sessions through Friday. Sentiment has been helped by a sharp drop in oil prices after the U.S. midterm election results, a move that investors see as supportive for Asia’s third-largest economy.

Foreign portfolio investors buy shares worth 459.61 billion rupees, or $4.89 billion, over the five sessions last week, including their biggest single-day purchase in India in about six years on Thursday. Ravi Singh, chief research officer at Master Capital Services, says the decline in crude prices eases concerns over inflation, India’s import bill and pressure on the rupee.

Singh adds that strong foreign institutional investor buying, supportive global cues and better-than-expected September-quarter earnings reinforce the rally.

Pharma and metals lead gains amid earnings optimism

Seven of the 16 major sectoral indexes advance in Sunday’s special session, while small-cap and mid-cap indexes rise 1% and 0.1%, respectively.

The pharma index climbs 1.7%, led by a 7.5% jump in Divi's Laboratories after the company reports a 64% year-on-year increase in quarterly profit. The metal index adds 0.4%, with Tata Steel gaining 2.1% after posting an 18% rise in operating profit and drawing upbeat brokerage commentary on its India business.

Raamdeo Agrawal, chairman and co-founder of Motilal Oswal Financial Services, says the combination of relatively low valuations and strong earnings growth could position Indian markets for bumper returns by next Diwali.

Our earlier article on the RBI’s $75–$80 billion rupee-defence intervention explained how the central bank has been drawing down reserves via spot dollar sales and dollar-rupee swaps after June’s special FX measures. We noted that elevated oil prices, higher U.S. yields and foreign equity outflows were intensifying pressure on the rupee, prompting additional steps such as a special dollar window for oil companies and tighter rules to curb dollar demand.

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