India investors are buying dividend stocks as rally stalls

India investors are buying dividend stocks as rally stalls

A gauge of top dividend paying firms in India is poised to outperform the country’s key equity benchmark by the most in 13 years as investors seek to hedge against any potential selloff in the market.

The NSE Nifty Dividend Opportunities 50 Index has rallied 22% this year while the NSE Nifty 50 Index advanced a tad below 9%, putting the gap between the two measures near a reading in 2010.

India’s benchmark gauges surged to their all-time highs this month, with a third of the top 200 firms on the NSE index trading at 50% above their respective 52-week lows. Still, the rally is showing signs of cooling as investors book profits in sectors such as media firms.

“Investors are trying to buy a margin of safety as markets have already run up in the last 2-3 months,” said Rajesh Palviya, a strategist with Mumbai-based Axis Securities Ltd. “In case of a correction or cooling off in markets, these high-yielding stocks act as a safeguard.”