India Stocks Struggle to Maintain Record-Breaking Rally’s Gains

India’s stock benchmark struggled to hold onto a record high as restrictions to curb the coronavirus outbreak spurred a selloff in many Asian markets.

The S&P BSE Sensex declined less than 0.1% to 44,145.81 at 9:54 a.m. in Mumbai even as most stocks rose, while the NSE Nifty 50 Index was little changed. Both gauges closed at new record-highs on Wednesday after four days of gains. The MSCI Asia Pacific Index was down 0.6% Thursday.

Valuations are becoming a concern for equity investors in India, with the Sensex at levels some technical analysts consider to be overbought. The gauge is trading at a 12-month price-to-estimated earnings multiple of about 22 times — a record high and more than two standard deviations above its 10-year average.

“The larger trend is bullish, and while most analysts would recommend buying the dips, it might be prudent to step back at this juncture and take a larger view on valuations and multiples,” said Nikhil Kamath, chief investment officer at True Beacon, an India-based hedge fund.

Indian stocks have benefited from a rally in value and cyclical shares this month as drug makers announced positive results from trials. On Wednesday, Pfizer Inc. said itsvaccine was 95% effective, paving the way to apply for the first U.S. regulatory authorization. Still, a resurgence in infections has prompted new restrictions in cities from Australia to the U.S.

As the world’s second-largest virus hotspot, India isseen as more sensitive to vaccine-related developments than other Asian markets, with strategists expecting economic and earnings growth to recover as the pandemic eases. Foreign buyers have pumped $5.1 billion into Indian stocks this month, on track for record November inflows, according to data compiled by Bloomberg.

Stocks have also been helped by better than expected results for the September quarter, with 70% of the companies on the Nifty 50 index beating or matching analyst estimates.

The yield on he 10-year sovereign bond was steady at 5.88%, while the rupee weakened 0.2% to 74.30 against the dollar.

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