Sensex Index Gains for First Day in Four on Debt-Risk Outlook, Monsoon

India’s stocks advanced, reversing a three-day drop, after Standard & Poor’s said the nation’s sovereign debt risk is moderated by domestic demand for bonds and as the monsoon spread across the country.

Tata Consultancy Services Ltd., a software services provider, gained 2.7 percent. Puravankara Projects Ltd., a property developer, advanced after JPMorgan Chase & Co. raised its rating to “overweight.” Domestic bond purchases provide a “strong mitigating” influence on risks, S&P said, while the weather bureau said the monsoon covered all of India today, nine days ahead of schedule.

“The S&P news will have a positive impact on investor sentiment,” said Swati Kulkarni, who manages the equivalent of about $1.3 billion in equities at UTI Asset Management Co. in Mumbai. “The initial reports of the monsoon are quite heartening. This will help in reducing inflationary expectations. If we have a normal monsoon then our gross domestic product growth can cross 8.5 percent.”

The Bombay Stock Exchange’s Sensitive Index, or Sensex, gained 173.04, or 1 percent, to 17,614.48. The S&P CNX Nifty Index on the National Stock Exchange rose 1 percent to 5,289.05. The BSE 200 Index increased 0.9 percent to 2,243.03.

‘Strong Position’

Tata Consultancy gained 2.7 percent to 759.15 rupees. The base of domestic purchasers of government bonds in India provides stability, Elena Okorotchenko, a credit analyst at S&P said at a conference in Hong Kong today, adding that Asian nations are in a “strong position” should there be another wave in the global financial crisis.

The monsoon, which accounts for more than 70 percent of India’s annual rainfall, covered the entire country nine days ahead of usual today, raising prospects for bigger harvests of rice, cotton, soybeans and sugar cane.

Rains set over northwest India, including all of Rajasthan and Uttar Pradesh, the nation’s biggest cane grower, Medha Kole, a director at the India Meteorological Department, said by phone from Pune. The monsoon typically blankets the nation by July 15.

India’s sowing of monsoon-planted crops such as rice, oilseeds and lentils may be the highest in two years, Farm Minister Sharad Pawar said yesterday. A drought last year helped fan food-price inflation to the highest level in 11 years in November.

Kotak Institutional Equities, a unit of Kotak Securities Ltd., expects Sensex company-earnings growth of 24.1 percent in the June quarter, compared with a year earlier. The brokerage predicts automakers, industrial and metal-related companies to “to lead robust earnings growth in the June quarter,” it said in an e-mailed note to clients.

Best Performer

Mahindra & Mahindra Ltd., India’s largest maker of sport- utility vehicles and tractors, increased 2.8 percent to 627.05 rupees. HDFC Bank Ltd., the third-biggest lender, gained 2.6 percent to 1,964 rupees. Hindalco Industries Ltd., the biggest aluminum producer, added 1.6 percent to 143.85 rupees.

The Sensex was the best performer among the world’s 20 largest equity markets in the second quarter. The gauge also climbed 1 percent in the three months ended June, its longest quarterly winning streak since at least September 1979, according to data compiled by Bloomberg. The Sensex has climbed in every quarter since Prime Minister Manmohan Singh in May 2009 led the Congress party to its biggest electoral victory in two decades, pledging to cut a fiscal deficit and boost growth.

‘Positive Direction’

Second-half buying of stocks by overseas investors is poised to surpass the first, said the nation’s biggest bank, as the government predicts the economy will expand at the quickest pace in three years.

“The positive direction in which India is moving is undeniable,” said Vikas Pershad, Chicago-based chief executive officer of Veda Investments LLC. “You’ve already seen hints of that in India’s recent relative outperformance.”

Puravankara Projects added 1.2 percent to 109.3 rupees after it was raised to “overweight” from “neutral” by Saurabh Kumar, an analyst at JPMorgan, with a 12-month price estimate of 155 rupees per share.

Sobha Developers Ltd., a property developer, rose 3.8 percent to 298.65 rupees after it was raised to “outperform” from “neutral” by Anand Agarwal, an analyst at Credit Suisse Group AG, with a price estimate of 375 rupees per share.

Overseas funds sold a net 2.32 billion rupees ($49.7 million) of Indian equities on July 2, paring investments in the stocks this year to 313.8 billion rupees, according to the nation’s market regulator.

Inflows from overseas reached a record 834.2 billion rupees in 2009, exceeding the high set two years ago in local currency terms, as the biggest advance 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:

Edserv Softsystems Ltd. (EDSS IN), an online training company, fell 3.4 percent to 210.8 rupees after saying the minimum price of shares being sold to large investors was fixed at 205 rupees each. EdServ said the sale will open on July 9, according to a statement on the Bombay Stock Exchange today.

Network 18 Media & Investments Ltd. (NETM IN), a media holding company, climbed 2.4 percent to 160.25 rupees after Viacom 18 Media Pvt. said it plans to buy shares of its Indian Film Co. unit.

Polaris Software Lab Ltd. (POL IN), a software services provider, soared 4.4 percent to 192.65 rupees, a five-month high, after saying its Laser Soft unit won a project from Andhra Pradesh State Cooperative Bank Ltd.

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

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