Sensex Index Advances as Economic Growth Accelerates; Mahindra, ONGC Gain
India’s stocks rose for a fourth day as a report showed the nation’s economic growth accelerated, fanning optimism company earnings will grow and mergers and acquisitions may increase.
Mahindra & Mahindra Ltd., a vehicle and tractor maker, climbed 4.9 percent after saying it’s interested in bidding for South Korea’s Ssangyong Motor Co. Oil & Natural Gas Corp., the largest state-owned oil explorer, added 3.2 percent. The economy grew 8.6 percent in the three months ended March 31 from a year earlier, the statistics office said in a statement today.
“Considering the global environment, the number is quite respectable,” said Navneet Munot, who oversees about $8.2 billion as chief investment officer in Mumbai at SBI Funds Management Pvt. “The growth differential between India and the rest of the world is increasing. We believe investors will look at India more positively. Investors should bet on the long-term growth story of India.”
The Bombay Stock Exchange’s Sensitive Index, or Sensex, gained 81.57, or 0.5 percent, to 16,944.63. The measure lost 3.5 percent this month, its first monthly drop since January.
Mahindra climbed 4.9 percent to 572.7 rupees. Ssangyong yesterday said seven companies have expressed interest in a takeover as it seeks to exit bankruptcy. Ssangyong would be “a good fit for us because we are in a similar business of making utility vehicles,” Mahindra’s automotive unit President Pawan Goenka said May 29.
Gross domestic product rose 8.6 percent in the three months ended March 31 from a year earlier after a revised 6.5 percent gain in the previous quarter, the statistics office said in a statement in New Delhi today. That matched the median estimate in a Bloomberg News survey of 22 economists.
India’s central bank said May 19 that it will raise rates cautiously even though they are “out of line” with the key wholesale-price inflation rate of 9.59 percent. The Reserve Bank’s benchmark reverse repurchase rate is at 3.75 percent after two quarter percentage-point increases since mid-March.
Oil & Natural gained 3.2 percent to 1,167.7 rupees. Bharat Heavy Electricals Ltd., the biggest power-equipment maker, added 1.5 percent to 2,353.4 rupees.
Suzlon Energy Ltd. tumbled 7.9 percent to 56.25 rupees, the lowest since November, after unexpectedly reporting a fourth quarter loss. The net loss was 1.88 billion rupees ($40.4 million). The median estimate of seven analysts compiled by Bloomberg was for profit of 2.84 billion rupees. Separately, Sumant Sinha, Suzlon Energy’s chief operating officer, is stepping down from tomorrow, the company said.
Suzlon is working to increase orders while market conditions continue to be challenging, Chairman Tulsi Tanti said in the May 29 earnings statement. Companies in Europe are postponing orders as the debt crisis makes it difficult to raise funds for renewable-energy projects and 2010 will be a moderate year for orders, Tanti said on May 12.
“At every dip, we’re a buyer,” S. Naganath, chief executive officer at DSP BlackRock Investment Managers Pvt, which manages $7 billion in assets, said of stocks trading in India on May 28. “If the market falls, then we’ll seek to deploy our cash.”
Foreign funds sold $2.3 billion of Indian stocks in May, which is poised to be the worst month for outflows since October 2008, following the collapse of Lehman Brothers Holdings Inc.
Inflows from overseas reached a record 834.2 billion rupees in 2009, exceeding the high set two years earlier in domestic currency terms, as the biggest rally in 18 years lured foreign funds. They 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:
Aurobindo Pharma Ltd. (ARBP IN) gained 1.6 percent to 852.75 rupees. The drug company’s profit in the year ended March 31 surged more than fivefold to 5.63 billion rupees.
AGC Networks Ltd. (AGC IN) sank 7.9 percent to 256.95 rupees. Essar Group said it agreed to buy Avaya’s 59.1 percent stake in the Indian communication services company, for 2.06 billion rupees, or 245 rupees a share.
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