 "Tata Motors helps Sensex end 2-day drop in subdued trade")
Tata Motors rallied the most in 15 months after giving a bullish guidance for Jaguar Land Rover sales. Larsen & Toubro, the largest engineering company, climbed the most in three weeks. Reliance Industries, owner of the world's largest refining complex, capped its biggest two-day climb in nine months. JK Tyre & Industries led tire companies higher amid a drop in prices of natural rubber, the main raw material.
The S&P BSE Sensex traded in the negative territory for better part of the day amid concern flows to emerging markets could slow after Federal Reserve Chair Janet Yellen said the case for raising borrowing costs is getting stronger. Volumes on the NSE Nifty 50 Index down 27 per cent from average levels, a signal that Monday's gains may be shortlived.
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"The spurt was led by index heavyweights as investors who had gone short got trapped," said C A Rudramurthy B V, head of research at Vachana Investments Pvt in Bengaluru. "There are no fresh buyers at these levels. We don't see this short rally holding."
The Sensex has risen 22 per cent from a low in February as capital flows to India picked up amid a wave of global policy easing. The bull run is slowing as an improving US economy scotches Brexit-fueled optimism that higher borrowing costs were a remote prospect. While Yellen stopped short of revealing the specific timing of a rate move, Vice Chairman Stanley Fischer said a rate increase in September is possible.
The 30-day volatility for the Nifty gauge fell to 9.61, the lowest level since December 2014, as the measure remains locked in a tight trading range. The India VIX Index, which tracks the expected swings in the Nifty gauge over the next 30 days, fell to its lowest level since March 2015. The equity gauge has swung more than one per cent only twice this month.
Sleepy august
It's been a subdued August for markets. The S&P 500 Index is locked in its tightest trading range since the end of 1965 amid confusion about Fed policy and the outlook for earnings. The Shanghai Composite Index ended little changed on Monday, with a 10-day volatility gauge falling to a two-year low. Swings in the MSCI Asia Pacific Index over the past two weeks have been the most muted since 2012, data compiled by Bloomberg show.
"Sentiments linked to the eventual Fed rate hike seem to be waxing and waning a number of times, and it would be healthy for markets to have an increase and be done with it," Sanjay Sinha, founder of Mumbai-based Citrus Advisors, said by phone. "A certain amount of complacency also seems to be setting in due to the muted impact of Brexit."
Global funds pulled money from Indian stocks in three of the past four session as investors pared risk before Yellen's speech on Friday, halting 29 days of inflows that was the longest stretch since November 2013. They sold a net $46 million of equities on August 25, paring this year's inflows to $5.8 billion. The purchases are still the highest in Asia after Taiwan and South Korea, data compiled by Bloomberg show.
Odds of a Federal Reserve rate next month have jumped to 42 per cent from 22 per cent a week ago as the US economy improves. The nation's unemployment rate dropped below 5 per cent this year for the first time since 2008 and payrolls data on Friday are forecast to show 180,000 jobs were added in August. A report on Monday is expected to show American consumers boosted spending for a fourth month in July.
State Bank of India ended five days of declines. Drugmaker Lupin and Wipro, the third-biggest software exporter, were among the biggest decliners on the Sensex.
JK Tyre climbed 6.3 per cent, taking this month's gain to 45 per cent. Rival Ceat rose 3.7 per cent to the highest price since August 9, while Apollo Tyres rallied 4.2 per cent to the highest level since October 2015.