Sensex Index Climbs to Two-Year High; Reliance Industries Gains on Outlook

India's benchmark stock index rose to a 25-month high after Finance Minister Pranab Mukherjee said the nation's rate of economic growth is "impressive" and may accelerate to the fastest pace in three years.

Reliance Industries Ltd., the nation's largest company by market value, surged to the highest in more than nine months after Nomura Holdings Inc. advised investors to buy the shares, citing the outlook for "large" earnings growth. DLF Ltd., the biggest developer, advanced to a two-month high. The rupee climbed to the strongest in 19-months per dollar as overseas funds bought more of the country's assets.

The Bombay Stock Exchange's Sensitive Index, or Sensex, gained 243.06, or 1.4 percent, to 17,935.68, the highest since Feb. 19, 2008. The S&P CNX Nifty Index on the National Stock Exchange rose 1.5 percent to 5,368.40. The BSE 200 Index increased 1.4 percent to 2,247.48. Stock markets were closed on April 2 for a public holiday.

"Domestic consumption remains strong, which will drive our growth," said Vaibhav Sanghavi, a director at Ambit Capital Ltd. in Mumbai, who manages funds for wealthy individuals. "The economy is buoyant and strong. There is no reason why we should not be able to achieve our growth targets." Sanghavi, who declined to disclose the value of assets he oversees, prefers shares in airlines, retailers and auto-part makers that he didn't name.

Profit Growth

The economy may expand by as much as 8.75 percent in the 12 months through March, Mukherjee said in New Delhi on April 2, reiterating a February forecast by his ministry. Foreign ownership of equities reached a record in dollar terms on March 30, according to the market regulator. The rupee today touched 44.495 per dollar, its highest level since Sept. 4, 2008.

Reliance Industries climbed 3.1 percent to 1,125.9 rupees, its highest since June 12. Investors should focus on "large" earnings growth, "significant" exploration and production upside, according to Nomura, which upgraded the stock from "neutral" today.

Tata Steel Ltd., the biggest producer of the alloy, advanced 4 percent to 678.5 rupees after raising product prices. The company raised prices of long products, used in construction, by 2,500 rupees a metric ton and of flat products, used by carmakers, by 10 percent, spokesman Prabhat Sharma said on April 3.

'Tailwind'

DLF rose 3.4 percent to 322.25 rupees, the highest since Feb. 3. Reliance Infrastructure Ltd., the builder of a mass rapid transit system in Mumbai, jumped 5.1 percent to 1,066.55 rupees, the steepest one-day gain since Nov. 11.

India's record spending on roads, power plants and ports will provide a "tailwind" for equipment makers, leading the benchmark stock index to a 10 percent gain this year, Principal Pnb Asset Management Co. said on April 1. Ranked below war- ravaged Ivory Coast and Sri Lanka for the quality of infrastructure, the nation plans to double spending to $1 trillion by March 2017.

Principal Large Cap Fund, the best performing among 64 Indian growth and income funds this year, has been adding shares of power and construction equipment makers relative to their weighting in the Bombay Stock Exchange BSE100 Index, Chief Investment Officer Rajat Jain said. Jain expects Sensex companies' earnings to rise 21 percent in the year that started began April 1.

'Consolidating' Growth

India's gross domestic product probably expanded 7.2 percent in the year ended March 31, "which is impressive by global standards," Mukherjee said, adding he's "optimistic that growth will climb back" to this year's forecast pace.

Expansion in Asia's third-biggest economy after Japan and China is "consolidating," Central Bank Governor Duvvuri Subbarao said March 22. Prime Minister Manmohan Singh aims to boost growth to 10 percent, a pace needed to pull 828 million people living on less than $2 a day out of poverty.

India's manufacturing expanded for a 12th straight month in March, according to the Purchasing Managers' Index released by HSBC Holdings Plc and Markit Economics on April 1. A reading above 50 indicates a gain in factory production.

India's industrial output increased 16.7 percent in January from a year earlier, after a 17.6 percent advance in December, which was the biggest jump since at least 1994, according to Bloomberg data.

Overseas Funds

Stocks also gained after a U.S. job report boosted confidence the global economy is recovering. The Labor Department report showed payrolls rose for the third time in the past five months and the most since March 2007. The unemployment rate held at 9.7 percent.

Overseas investors bought a net 8.41 billion rupees of Indian stocks on March 30, taking purchases of the equities this year to 206.4 billion rupees ($4.61 billion), according to the most recent data available from the Securities and Exchange Board of India.

Foreign funds placed a net 199 billion rupees in shares last month through to March 30, the most since Jan. 1, and have been net buyers on all trading days after Mukherjee on Feb. 26 pledged to trim the fiscal deficit from a 16-year high and boost funds available for roads, bridges and power projects.

Inflows into India's stock market reached a record 834.2 billion rupees in 2009, beating the high set two years earlier in local currency terms, as the biggest rally in 18 years lured foreign funds. Funds sold a record 529.9 billion rupees of shares in 2008, triggering a record annual decline.

The following were among the most active on the exchange:

Cinemax India Ltd. (CNMX IN) jumped 3.8 percent to 67.2 rupees. The theater chain plans to start a four-screen multiplex at Kochi in the southern state of Kerala, it said in a statement to the Bombay Stock Exchange April 1.

Hero Honda Motors Ltd. (HH IN) climbed 4.8 percent to 2,038.25. India's largest motorcycle maker said April 1 that sales in March rose 17 percent.

Kalpataru Power Transmission Ltd. (KPP IN) rose 1 percent to 1,042.05 rupees. The company won an order worth more than 3.2 billion rupees, it said in a statement on April 1.

Nagarjuna Construction Co. (NJCC IN) advanced 4.6 percent to 174.95 rupees. The construction company may sell a stake in a holding company that owns shares in various road and power projects, Mint newspaper reported. Managing Director A.A.V. Ranga Raju couldn't immediately be reached for comment on the report.

Steel Strips Wheels Ltd. (SSW IN) soared 20 percent to 151.6 rupees. The automobile equipment maker may sign contracts by June to supply wheel rims to Fiat SpA and Volkswagen AG in Europe and South America, Managing Director Dheeraj Garg said on April 1. Separately, the company won an order from France's Renault SA to supply 35,000 wheels per month, it said in a statement to the Bombay Stock Exchange today.

Talbros Automotive Components Ltd. (TALB IN) advanced 4.1 percent to 57.45 rupees. The Indian autoparts maker said in a stock exchange filing it started production at its fourth manufacturing plant.

Welspun Gujarat Stahl Rohren Ltd. (WGS IN) gained 2.7 percent to 285.1 rupees. The maker of welded pipes may buy a majority stake in Aziz Pipe Co., a Saudi Arabian company, the Times of India reported, without saying where it got the information. Executive Director Asim Chakraborty couldn't immediately be reached for comment on the report.

To contact the reporter on this story: Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net

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