Oct. 13 (Bloomberg) -- India's Sensitive Index rose to a record as accelerating growth in Asia's fourth-largest economy drives quarterly profit.

Infosys Technologies Ltd., the nation's second-biggest provider of computer services, paced gains after reporting second-quarter profit on Oct. 11 that beat analysts' estimates as orders increased. The company also raised profit forecasts for the year to March 31, leading analysts to lift the stock's price target.

``All possible indicators remain strong and company earnings, as indicated by Infosys, are likely to be good,'' said Navneet Munot, who manages the equivalent of $3.7 billion of Indian stocks and bonds at Birla Sunlife Asset Management Co. in Mumbai. ``The sentiment is, naturally, bullish.''

The Sensex, as the Bombay Stock Exchange's Sensitive Index is known, rose 198.44, or 1.6 percent, to 12,736.42 when trading ended at 3:30 p.m. local time in Mumbai, surpassing the record close of 12,612.38 set on May 10. All 30 stocks in the Sensex have risen since the June 14 low. The index gained 2.9 percent this week, the most in nine weeks.

Finance Minister Palaniappan Chidambaram said the rise was because of cheaper crude and earnings expectations.

``The rise in the stock market has been orderly,'' he told reporters in New Delhi today. ``The market is up on expectation of better corporate results and the softening of oil prices.''

Investors Return

Stocks are climbing as investors pour funds back into the local market, betting companies such as Reliance Communications Ltd. and Grasim Industries Ltd. will benefit from accelerating economic growth. Stock sales by offshore investors in May triggered a monthlong slide in the market that wiped $259 billion off the value of the country's listed companies.

Indian stocks dropped after investors sold shares on concern higher interest rates would stifle economic growth and oil prices at records would add to corporate energy costs and crimp consumer spending.

Those concerns were allayed after the U.S. Federal Reserve ended a two-year streak of interest-rate increases and oil prices dropped 20 percent from record highs set in July.

Overseas investors are looking to benefit from India's relatively rapid growth. Last year they ploughed a record $10.7 billion into the local market and this year's net purchases total $5.37 billion.

Since June 14, they've bought local shares worth $2.77 billion, surpassing the amount they sold during the rout.

``India is a great long-term story, it's a story about strong domestic demand,'' said Sanjay Lodha, senior investment adviser at Pictet Asia Pte in Hong Kong. ``The sell-off in May- June was overdone.''

Extending Coverage

Reliance Communications in July reported a fiscal first- quarter profit after extending coverage to more towns and villages in the world's second-fastest growing cellular market. Net income was 5.13 billion rupees ($110 million) in the three months ended June 30, compared with a loss of 2.5 billion rupees a year earlier. Revenue rose 42 percent to 32.50 billion rupees.

Grasim Industries posted better-than-expected profit for the three months to June 30. Net income, excluding that of its units, rose 24 percent to 3.12 billion rupees in the three months to June 30 from a year earlier. The profit beat the 2.86 billion-rupee median estimate of seven analysts in a Bloomberg survey.

``Earnings were ahead of expectations and a positive surprise for the June quarter,'' said Anup Maheshwari, who manages about 70 billion rupees of Indian stocks as head of equities at DSP Merrill Lynch Fund Managers Ltd. in Mumbai. ``Corporate earnings are expected to grow at between 15 percent and 20 percent so we can expect similar returns for the stock market.''

Growth Forecast

India's Prime Minister Manmohan Singh yesterday raised the government's forecast for growth in Asia's fourth-largest economy to 8.5 percent, following expansion of more than 8 percent annually since 2003.

India's $775 billion economy grew 8.9 percent from a year earlier in the three months ended June 30, a pace of expansion second only to China among the world's 20 biggest economies. The U.S., the world's largest economy, grew 3.5 percent and Japan, Asia's biggest, reported a 2.5 percent rate.

``The process of growth under way in India is now much more sustainable than ever before,'' Prime Minister Singh told an India-European Union Business summit in Helsinki yesterday, according to a statement from his office. ``We are aware that to sustain the growth momentum, we need to do much more in infrastructure.''

Exchange Indexes

Nine out of 11 indexes on the Bombay Stock Exchange rose today, with technology, banking and consumer companies leading the advance.

Infosys rose 3.3 percent to 2,088.65 rupees. Reliance Industries Ltd., which yesterday outstripped Oil & Natural Gas Corp. as the nation's most valuable company, gained 1.8 percent to 1,190.15 rupees. Reliance Communication rose 21.85 rupees, or 6.3 percent, to 367.8. Grasim rose 40.8 rupees, or 1.6 percent, to 2,672.4.

The stock market recovery is spurring companies to sell shares. Cairn Energy Plc, a U.K. company that drills for oil and gas in Asia, yesterday filed offer documents with Indian regulators to sell shares in its Indian unit in December.

The unit plans to raise as much as $2 billion in an initial share sale, bankers familiar with the transaction said.

Power Secretary R.V. Shahi said yesterday the government wants Power Finance Corp., National Hydroelectric Power Corp., Rural Electrification Corp. and Power Grid Corp. to sell stock. Each company will sell a 10 percent stake to investors, he said.

Local investors are contributing to the market's gains as well. Domestic funds remained buyers of stock during the slump, purchasing shares worth $1.12 billion from May 10 to June 14. Since the low in June they bought $1.78 billion worth of stock, official figures show.

To contact the reporters on this story: Pooja Thakur in Mumbai at pthakur@bloomberg.net; Ashok Bhattacharjee in New Delhi at ashokb@bloomberg.net.

Last Updated: October 13, 2006 09:13 EDT