Indian Stocks Climb, But Investors Remain Defensive

Image: " Decorated Indian elephant " by Faraz Usmani-Flickr. Licensed under CC BY 2.0 via Wikimedia Commons.

Asia had a tough third quarter, and even the once high-flying Indian stock market didn't prove invulnerable to the downward trend. Overall, the BSE Sensex (NYSEINDEX: ^BSESN) finished the quarter down more than 1,600 points, but on Thursday, investors celebrated a coming three-day weekend by bidding up the stock market by 66 points to 26,221. Yet even though the Sensex managed to post a positive performance to begin October, there are still some reasons that investors are showing concern for India's future.

Sticking with solid names

As you see in the U.S., certain sectors of the Indian stock market are seen as having lower risk than others. Today, you could see the tug of war between these defensive sectors and other, more aggressive portions of the Indian economy in the way that the stock market behaved. In general, India has a strong presence in the information technology and healthcare fields, with several well-known consulting firms offering their IT services around the world and many drug manufacturers taking advantage of lower production costs on the subcontinent to sell into the global pharmaceutical market. These stocks were among the better performers Thursday, with Wipro and Infosys both posting gains in the IT arena while Sun Pharma and Lupin helped lift the pharmaceutical sector with their rises.

By contrast, other sectors didn't fare as well. Automakers have considerable exposure to the ability of local consumers to provide demand for their vehicles, and so news that industrial manufacturing activity fell to their lowest levels since early this year weighed on some of the major players in the auto sector. Meanwhile, financial stocks rely on healthy markets and optimistic business conditions, and the growing uncertainty about whether India can sustain its impressive growth led some investors to sell off their bank holdings.

Currency considerations could play a big role in determining the future course of the Indian stock market. The rupee has steadily climbed to its highest level since late 2013, helping exporters to the U.S. get better performance in local currency terms. Yet even though weakness has arguably boosted profits at many Indian companies, some emerging-market investors are growing nervous about the extent of the collapse in currencies compared to the U.S. dollar and other developed-nation currencies. Recent interest rate cuts in India could lead to further weakness for the rupee, but it's uncertain how much bigger a stimulative push dollar strength can provide for the Indian economy.

Overall, India has done a much better job of holding its own than most of its emerging-market peers lately. Whether it can continue depends on whether India remains true to its increasingly business-friendly strategies. For now, investors are cautiously optimistic about the prospects for Indian stocks.

The $15,978 Social Security bonus most retirees completely overlook

If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income. In fact, one MarketWatch reporter argues that if more Americans knew about this, the government would have to shell out an extra $10 billion annually. For example: one easy, 17-minute trick could pay you as much as $15,978 more... each year! Once you learn how to take advantage of all these loopholes, we think you could retire confidently with the peace of mind we're all after. Simply click here to discover how you can take advantage of these strategies.

The article Indian Stocks Climb, But Investors Remain Defensive originally appeared on

Dan Caplinger has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

Copyright © 1995 - 2015 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics


Latest Markets Videos

    The Motley Fool

    Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

    Learn More