Mahindra, Sterlite Climb as India's Sensex Posts First Advance This Week

India’s stocks rose for the first time in three days as Finance Minister Pranab Mukherjee said the nation’s food inflation may moderate, easing concerns of further increases in interest rates.

Sterlite Industries (India) Ltd., the nation’s largest copper producer, advanced the most in a month as metal prices climbed. Mahindra & Mahindra Ltd. climbed 2.4 percent on plans to introduce its first motorcycles within the next few months.

The Bombay Stock Exchange’s Sensitive Index, or Sensex, rose 99.09, or 0.6 percent, to 17,977.23. The S&P CNX Nifty Index on the National Stock Exchange gained 0.6 percent to 5399.35. The BSE 200 Index advanced 0.5 percent to 2,290.76.

“Once inflation is down, the chances of increasing interest rates is minimal,” said Kishor Ostwal, chairman and managing director of CNI Research Ltd. in Mumbai. “In the long- term, it’s good for the markets.”

India’s food inflation may moderate after the harvest of crops, Mukherjee said in Hyderabad yesterday. He also said that price increases remain a matter of concern. The nation’s inflation rate of 13.9 percent is the highest among 17 Asian markets tracked by Bloomberg.

The accelerating price increases prompted the Reserve Bank of India to raise its benchmark interest rate three times this year, and it’s due to announce the next monetary policy decision on July 27. All 16 economists surveyed so far by Bloomberg News expect the reverse repurchase rate to be raised next week by a quarter of a percentage point to 4.25 percent. India’s 10-year bond yields are at the highest level in a month on speculation of the increase.

Sensex Rally

Ostwal said the central bank may not increase lending rates next week. An easing inflation outlook, along with a good monsoon, government policies and earnings growth may help the Sensex rally further, Suresh Mahadevan, an analyst at UBS AG, said in a report received today. The analyst has a March 2011 target of 22,000 for the gauge, representing a 12 percent gain from yesterday’s close. Laggards on the BSE 100 Index including Maruti Suzuki India Ltd. and Steel Authority of India Ltd. may offer “interesting” investment ideas, Mahadevan said.

The condition of monsoon-sown crops is good and there will be “substantial improvement” in sowing during the rest of the season, Farm Minister Sharad Pawar told reporters yesterday.

Mahindra

Mahindra & Mahindra, the nation’s biggest maker of sport- utility vehicles, rose 2.4 percent to 616.75 rupees as its new plans will help the company challenge Hero Honda Motors Ltd. in the world’s second-biggest two-wheeler market.

Mahindra intends to add motorbikes ranging from low-cost entry models to premium products, Anoop Mathur, the head of Mahindra’s two-wheeler business, said in an interview at the company’s Mumbai headquarters yesterday. He declined to elaborate further on the product plan.

Stocks also gained as foreign investors bought more Indian equities than they sold for a 10th day. Overseas funds bought a net 2.04 billion rupees ($43.3 million) of Indian equities on July 19, raising total investments in the stocks this year to 403.2 billion rupees, according to the nation’s market regulator.

Foreign fund 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.

Sterlite gained 4.2 percent to 173.25 rupees, the highest in a month. The price of copper climbed for a third day in Asia as inventories extended the longest string of declines in more than a year, signaling steady demand. Hindalco Industries Ltd., India’s biggest aluminum producer, rose 2.4 percent to 156.45, its highest level in two months as the metal’s price increased.

The following were among the most active on the exchange:

Hindustan Media Ventures Ltd. (HMVL IN), which raised 2.7 billion rupees in an initial share sale, climbed 14 percent to 188.95 rupees in its trading debut.

Monsanto India Ltd. (MCHM IN), a chemical manufacturer, gained 4.1 percent to 1,735.35 rupees after reporting quarterly net income rose 13 percent.

Panacea Biotec Ltd. (PNCB IN), a drugmaker, increased 1.4 percent to 196.65 rupees after saying first-quarter profit more than doubled.

SKF India Ltd. (SKF IN), the nation’s second-biggest maker of ball bearings by market value, rose 4.1 percent to 534.35 rupees, its highest close in at least 19 years, after second- quarter profit more than doubled.

TVS Motor Co. (TVSL IN), India’s third-largest motorcycle maker, surged 5.6 percent to 128.5 rupees, the highest level in more than four years. The company will give investors one free share for every one held, it said when reporting quarterly profit more than doubled on higher sales.

To contact the reporter on this story: Kristine Aquino in Singapore at kaquino@bloomberg.net

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