Indian stocks advanced for the first time this week, erasing an earlier decline, ahead of the monthly expiration of derivatives contract.
Drug maker Lupin Ltd rallied to a three-week high. Vedanta Ltd rebounded from an intra-day drop of as much as 3.7 per cent. ICICI Bank Ltd and HDFC Bank Ltd, India's two biggest private lenders, climbed at least one per cent each. Mahindra & Mahindra Ltd, India's largest maker of tractors, advanced for the second day. Tata Motors Ltd, the owner of Jaguar Land Rover, fell to a one-month low.
The S&P BSE Sensex rose 0.7 per cent to 25,823 at the close in Mumbai on Wednesday, erasing an earlier decline of as much as one per cent. The CNX Nifty Index gained 0.4 per cent to 7,846. The market tends to be volatile ahead of the expiry of the derivatives contract on the last Thursday of every month, according to IIFL Wealth Management Ltd.
Stocks rose in Europe, buoyed by a rebound in commodities and signs the region's economy is expanding. US equity-index futures recovered from a drop in Asian trading fuelled by the lowest reading on a gauge of Chinese manufacturing since 2009.
"The market was volatile ahead of the expiry and mixed cues from Asian and European markets," said Shishir Bajpai, a director at IIFL Wealth Management Ltd in Mumbai, which has $12 billion (Rs 79,152 crore) under management and advisory. "Investors are focused on the next week's policy meeting."
RBI meeting looms
Local investors are looking ahead to see whether the Indian central bank (Reserve Bank) will lower interest rates on September 29 to bolster the economy and spur a recovery in company earnings.
Governor Raghuram Rajan left the main rate unchanged at 7.25 per cent in August, after three cuts in 2015, to meet his inflation target of six per cent by January. Official data have shown that consumer price gains slowed to 3.66 per cent last month as oil fell below $50 a barrel and food costs dropped.
Emerging-market stocks have slumped as investors weighed the timing of an increase in the near-zero borrowing costs by the US central bank (Federal Reserve) that have supported demand for riskier assets. The MSCI Emerging Markets Index has declined 17 per cent this year and trades at 10.5 times projected 12-month earnings, a 30 per cent discount to the MSCI World Index, data compiled by Bloomberg show.
Lupin rose 2.7 per cent to its highest since August 31. Vedanta climbed 2.9 per cent, paring this year's loss to 56 per cent. ICICI Bank added one per cent. HDFC Bank climbed 1.8 per cent. State Bank of India rose 0.8 per cent.
Mahindra & Mahindra increased 1.8 per cent. ITC Ltd added 1.3 per cent. Tata Motors slid 1.7 per cent, extending Tuesday's 4.8 per cent plunge.
Foreign funds bought a net $68 million (Rs 448.53 crore) of stocks on Monday (September 21), extending this year's inflow to $4.2 billion (Rs 27,703 crore), the most among eight Asian markets tracked by Bloomberg. Foreigners pulled $2.6 billion (Rs 17,150 crore) from Indian equities last month, the most since October 2008, as demand cooled for riskier assets.
The Sensex has declined 6.1 per cent this year and trades at 14.7 times projected 12-month earnings. The MSCI Emerging Markets Index is valued at a multiple of 10.5.
