Indian stocks climbed the most in two weeks as an improvement in manufacturing signaled Asia’s third- biggest economy may withstand the sovereign-debt crisis in the European Union, its biggest trading partner.
State Bank of India (SBIN), the biggest lender, DLF Ltd. (DLFU), the largest developer, and Tata Motors Ltd. (TTMT) rallied at least 5 percent each on optimism the central bank will cut rates to revive growth. The nation’s manufacturing gauge rose to a six- month high in December. Reliance Industries Ltd. (RIL), the most valuable company, climbed after announcing new investments.
The BSE India Sensitive Index (SENSEX), or Sensex, jumped 421.44, or 2.7 percent to 15,939.36 at the 3:30 p.m. close in Mumbai, its biggest advance since Dec. 21. The gauge sank 25 percent last year, its second worst annual loss, as Europe’s debt crisis cooled demand for Indian exports, eroding company earnings already threatened by record borrowing costs.
“The positive factory data from India and other Asian countries gave investors something to cheer about,” Kaushik Dani, a fund manager at Peerless Mutual Fund, which manages the equivalent of $824 million in assets, said by phone from Mumbai today. “People are hopeful of a rate cut and perhaps that’s why the interest rate-sensitive stocks such as banking, realty, metal and carmakers showed an uptick.”
The Reserve Bank of India may reverse its record pace of funding-cost increases as inflation shows signs of easing, the British Broadcasting Corp. reported yesterday, citing Governor Duvvuri Subbarao. The RBI in December kept rates unchanged for the first time in eight meetings as Europe’s debt woes cooled demand for Indian exports. Wholesale-price inflation slowed to a one-year low of 9.11 percent in November. The bank’s next policy review is on Jan. 24.
“Monetary policy in 2012 could see a complete reversal almost independent of inflation,” Nilesh Jasani, an analyst at Jefferies & Co., wrote in an report dated Jan. 2. “In 2011, the policy goal was containing inflation. In 2012, this could shift to the revival of economic growth.”
Parliamentary gridlock, high inflation, a widening budget deficit and the weakest quarterly economic growth in two years dragged India’s rupee to a record low last month, increasing import prices in a country that buys 80 percent of its fuel from overseas. The Sensex was the worst performer among the 10 biggest markets globally last year in dollar terms.
Still, the Purchasing Managers’ Index in India climbed to 54.2, HSBC Holdings Plc and Markit Economics said yesterday. A reading of more than 50 indicates expansion. Measures of output, employment, orders and exports all increased, HSBC said.
“India’s politics and economy has tremendous resilience and in the worst crisis, when pushed to the wall, things start changing,” Nirmal Jain, chairman of brokerage India Infoline Ltd., told Bloomberg UTV today. “We have seen this in the past and things can recover.”
Asian stocks (MXAPJ) rose as manufacturing growth from Australia, China and India added to optimism the region’s economies will withstand the European crisis. The MSCI Asia Pacific Excluding Japan Index (MXAPJ) gained 2.1 percent to 400.63, its highest level in three weeks.
India’s S&P CNX Nifty (NIFTY) Index on the National Stock Exchange added 2.8 percent to 4,765.30. The BSE 200 Index (BSE200) also gained 2.8 percent to 1,904.98. The BSE Mid-Cap Index added 2.4 percent to 5,256.02, the most since Aug. 29.
State Bank rallied 4.8 percent to 1,705.65 rupees and ICICI Bank Ltd. (ICICIBC) added 4.2 percent to 725.8 rupees. HDFC Bank Ltd., (HDFCB) the third-biggest, rose 2.9 percent to 439.15 rupees. Housing Development Finance Corp. (HDFC), the biggest mortgage lender, rose 2.3 percent to 665.2 rupees, halting four days of losses.
Infosys Ltd. (INFO), the second-largest software maker, increased 2 percent to 2,864.3 rupees. CLSA Asia-Pacific Markets upgraded the stock to “outperform” and raised its earnings estimates for the year ending in March 2013 by 13 percent. Rival Tata Consultancy Services Ltd. (TCS) gained 1.6 percent to 1,197.6 rupees. Wipro Ltd. (WPRO) rallied 4.4 percent to 416.5 rupees.
India’s biggest software exporters get at least 80 percent of their sales from abroad. The rupee’s 16 percent plunge last year, the most among Asian currencies, is likely to boost the value of their repatriated earnings.
DLF surged 6.8 percent to 191.45 rupees. Larsen & Toubro Ltd. (LT), the largest engineering company, added 5.1 percent to 1,060.85 rupees. Jaiprakash Associates Ltd. (JPA), a builder of dams, roads and bridges advanced 3.8 percent to 54.65 rupees.
Tata Motors climbed 5.4 percent to 193.95 rupees, its highest close since Oct. 31. Maruti Suzuki India Ltd. (MSIL), the biggest car maker, advanced 1.5 percent to 952.8 rupees.
Reliance, the owner of the world’s largest oil-refining complex, increased 2.6 percent to 724.65 rupees. The company controlled by billionaire Mukesh Ambani will help Network 18 Group founder Raghav Bahl to acquire the assets of a company that runs 12 regional channels for $395 million. The deal will help Reliance secure content rights for its high-speed data services, which it plans to start this year.
Sterlite Industries (India) Ltd. (STLT), the nation’s biggest copper producer, surged 4.7 percent to 94.45 rupees. The company raised cathode prices for the second straight month, resisting a global decline, as the rupee fell and optimism grew demand will revive. Tata Steel Ltd. (TATA), the biggest producer of the alloy, climbed 6.1 percent to 361.85 rupees.
Coal India Ltd. (COAL), the world’s largest producer of the fuel, jumped 4.8 percent to 327.2 rupees, extending yesterday’s 3.8 percent gain.
Overseas investors (FIINNET) sold $512 million of equities in 2011, data from the Securities & Exchange Board of India show. That compares with a record inflow of $29.4 billion in 2010, which fueled a 17 percent rally in the Sensex that year and made it the best performer among the world’s 10 biggest markets.
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