Indian stocks rose after Credit Suisse AG upgraded the nation to overweight amid an escalating US-China trade war, while the government sought to cement its position by revoking seven decades of autonomy in the disputed Muslim-majority state of Kashmir.
The S&P BSE Sensex gained 0.8 percent, its biggest increase in a month, to 36,976.85 at the close in Mumbai. The NSE Nifty 50 Index also climbed 0.8 percent, paring losses from Monday that had taken the decline to more than 10 percent from the gauge’s all-time high close June 3, a retracement seen as a technical correction.
The US slapped a currency-manipulator tag on China after it allowed the yuan to tumble to its weakest level in a decade against the dollar.
This comes after Beijing asked state-owned companies to suspend imports of US agricultural products.
Investors may be better off holding South Asia stocks as an escalation in the trade war may lower global interest rates, weaken the yuan and push up the US dollar, Credit Suisse strategists Dan Fineman and Kin Nang Chik said.
Further, the action on Kashmir consolidated Indian Prime Minister Narendra Modi’s position as a strongman. The move to make Kashmir a “union territory” — similar to India’s capital New Delhi — gives the government complete control over the state.
“The Credit Suisse upgrade and an improvement in global indexes have helped sentiment,” said Sameer Kalra, founder of Mumbai-based advisory firm Target Investing.
“The action on Kashmir
by keeping tension from escalating has been a plus to the market.”
“We don’t see major upside to the market over the next 6-9 months given the weak outlook from companies. With stress in the financial system, there could be more pain that may come up on the surface in the next couple of months,” he said.
Fifteen of 19 sector gauges compiled by BSE Ltd advanced, led by a measure of capital goods companies.
Housing Development Finance Corp contributed the most to the index advance, increasing 1.7 percent; Yes Bank had the largest gain, rising 5.2 percent. Sensex is still down 1.1 percent in the past 5 days and has fallen 6.4 percent in the past 30 days.