India's benchmark index rose on Thursday, despite losses in other global indexes, as oil stocks rallied on slumping crude prices, while overall sentiment was also bolstered after J.P. Morgan upgraded domestic equities to "overweight." The fall in Brent to an 18-month low and of US crude futures to an eight-month low is a big relief for a net importer like India, especially given its bloated fiscal and current account deficits and slowing economic growth.
Also on Thursday, J.P. Morgan upgraded its call on Indian equities from "neutral", citing a number of factors including historic valuations, expectations for monetary stimulus, lower oil prices, and a weak rupee. The upgrade and lower oil prices were a relief on a week marked by disappointment over the central bank' decision to keep interest rates unchanged, a Fitch Ratings downgrade of India's sovereign outlook and worries about the global economy.
"If the crude sustains at lower levels then definitely other things like current account deficit will get corrected, and we may even see appreciation of rupee, and that may even translate into lower inflation," said Sunil Jain, head of retail equity research at Nirmal Bang.
India's main 30-share BSE index rose 0.8 percent to 17,032.56 points, recovering from an earlier fall of as much as 0.6 percent. The main index rose above the levels on Friday, the trading session before the Reserve Bank of India decision, marking a stronger-than-expected recovery from a decision that had stunned domestic markets. The broader 50-share NSE index rose 0.87 percent to 5,165.00 points.
Despite Thursday's gains, traders said the outlook for stocks remains uncertain. State-run refiner Hindustan Petroleum Corporation gained 4.2 percent, while producer Oil & Natural Gas Corp rose 1 percent. Banking shares, as measured by NSE's banking index, rose 2.1 percent, with ICICI Bank up 2 percent and HDFC Bank up 1.6 percent. Bharat Heavy Electricals advanced 3.6 percent, while Larsen & Toubro gained 2.2 percent.