Nov. 6 (Bloomberg) -- MMTC Ltd., NMDC Ltd. and State Trading Corp. led gains among India’s state-controlled companies after the government approved a plan to boost public holdings in these stocks, making more shares available to investors.

The Bombay Stock Exchange’s BSE-PSU Index of 48 state-owned stocks climbed 3.8 percent, its biggest gain in four months. MMTC, India’s biggest state-run trading company, surged 15 percent to 34,650 rupees as of 11:33 a.m. in Mumbai. State Trading, the No. 2, soared 13 percent to 348.65 rupees. NMDC, the largest iron-ore producer, rose 10 percent to 338 rupees.

All profitable state-owned companies must have at least 10 percent of their shares held by the public, Home Minister Palaniappan Chidambaram told reporters in New Delhi yesterday. The government will use the money raised from the sale of shares of these companies for social spending, he said.

“It’s a good move as it will broaden market capitalization, and improve government finances” said Kenneth Andrade, head of investments at IDFC Asset Management Co., who oversees assets worth $5.4 billion in Mumbai.

The government owns 98.38 percent in NMDC, 99.33 percent in MMTC while it holds 91.02 percent in State Trading, according to filings to the Bombay Stock Exchange.

Budget Deficit

India’s fiscal deficit reached 6 percent of gross domestic product in the year ended March 31, surpassing the 2.5 percent government target. The key Sensitive stock index has more than doubled since its low in March this year.

Prime Minister Manmohan Singh won a resounding re-election in May, reducing his dependence on allies such as the communist parties who opposed asset sales and looser foreign investment policies during his first term. A coalition without communist parties will allow Singh to sell state assets and accept more foreign investments in insurance and banking.

The benchmark index advanced 1.3 percent to 16,267.68 in Mumbai trading.

Hindustan Copper Ltd., India’s largest copper miner, 99.59 percent state-owned, gained 10 percent to 256.35 rupees. Rashtriya Chemicals & Fertilizers Ltd., 92.5 percent government -owned, advanced 13 percent.

To contact the reporter on this story: Pooja Thakur in Mumbai at pthakur@bloomberg.net

Last Updated: November 6, 2009 01:54 EST