Most Indian stocks advanced as data signaled the U.S. recovery is picking up and overseas investors extended purchases of Indian equities.
The BSE India Sensitive Index (SENSEX), or Sensex, rose 0.2 percent at 18,610.77 at the close in Mumbai. Three stocks increased for every two that fell on the 30-stock gauge. Tata Power Co. (TPWR), the largest non-state generator, surged the most in three weeks. Housing Development Finance Corp. (HDFC), a mortgage lender, rose for the second day. Reliance Industries Ltd. (RIL), owner of the world’s largest oil-refining complex, fell 0.9 percent.
U.S. factory output climbed, home-builder confidence rose to a six-year high and earnings exceeded estimates at almost three-quarters of companies in the S&P 500 index, boosting the outlook for the world’s largest economy. Overseas funds bought local shares for a 16th straight day on Oct. 15, taking their purchases this year to $18 billion, the most among 10 Asian markets tracked by Bloomberg, excluding China.
“Emerging markets are big beneficiaries of the world moving out of a crisis mentality,” Richard Titherington, chief investment officer and head of emerging markets at JPMorgan Asset Management, told Bloomberg TV India today. “I wouldn’t expect emerging market equities to go up in a straight line, though the outlook looks pretty good from where we are now.”
Indian stocks were raised to neutral from underweight in a report today by Macquarie Group Ltd., which cited “overdue” economic reforms by Prime Minister Manmohan Singh’s government.
The Sensex last month had its biggest monthly gain since January as Singh opened retailing and airlines to foreigners, pared fuel subsidies and reduced a tax on companies’ overseas debts in a wave of policy making after two years of gridlock.
“The government needed to move, it has begun to move and you can see the pent up enthusiasm in investors’ mind,” said JPMorgan’s Titherington. “It’s interesting that despite a lot of domestic pessimism, inflows into India have held up well, certainly compared with the rest of the emerging markets. Indian investors and businessmen in the last six to 12 months have tended to focus on the negatives. For foreign investors, the long-term story is so obvious and compelling that India is one of the preferred investment destinations.”
Most Indian stocks also advanced as the MSCI Asia Pacific Index climbed on speculation Spain will move toward seeking financial aid, and after two senior German coalition lawmakers said the country is open to credit assistance for Spain, signaling a softening of public rhetoric before European Union leaders convene for a summit tomorrow.
The European Union accounted for 17.2 percent of India’s exports in the six months ended September 2011, according to the commerce ministry.
The Sensex has surged 20 percent this year as foreigners bought local stocks. The gauge trades at 14.8 times estimated earnings, compared with the MSCI Emerging Markets Index (MXEF)’s 11.6 times. One of the three Sensex companies that have reported profits for the September quarter has missed analyst estimates.
“We are not as cheap as we were a couple of months ago but we haven’t reached a stage where you can say that we are overly expensive,” Sunil Singhania, head of equities at Reliance Capital Asset Management Ltd., India’s second-biggest mutual fund with $17 billion in assets, told Bloomberg TV India yesterday. “Come December the markets will start discounting next fiscal year’s earnings, and even today expectations are that there will be 10 to 12 percent increase.”
Earnings for 40 percent of the 30 Sensex companies trailed forecasts in the June quarter, compared with 30 percent in the three months ended March and 47 percent three months earlier, according to data compiled by Bloomberg.
The S&P CNX Nifty (NIFTY) Index on the National Stock Exchange of India Ltd. rose 0.2 percent to 5,660.25. Its October futures settled at 5,669.50. The BSE-200 Index gained 0.2 percent while the BSE Mid-Cap Index fell less than 0.1 percent. The National Stock Exchange of India and the BSE Ltd. traded 918 million shares yesterday, equivalent to the 12-month daily average.
Tata Power rallied 2.2 percent to 103.95 rupees, the most since Sept. 28. Housing Development added 1.2 percent to 752.85 rupees. Larsen & Toubro Ltd. (LT), the largest engineering company, added 1.3 percent to 1,626.25 rupees, halting a three-day drop.
Reliance Industries fell 0.9 percent to 805.15 rupees. Tata Consultancy Services Ltd. (TCS), the largest software services exporter, lost 1 percent to 1,283.15 rupees.
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