The BSE India Sensitive Index (SENSEX), or Sensex, rose 0.3 percent to 18,758.63 at the close. Sterlite, the biggest copper maker, climbed the most in a month after reporting a 74 percent jump in profit. Mahindra, India’s largest tractor producer, had that sharpest gain in a month, the best performance on the gauge.
Earnings have trailed analyst forecasts at only one of the 11 Sensex companies that have reported results for the quarter ended September, compared with 40 percent in the three months through June, data compiled by Bloomberg show. The Sensex has surged 21 percent this year as foreigners bought a net $18.2 billion of shares, the most among 10 Asian markets tracked by Bloomberg, excluding China.
“Earnings are not too disappointing, with most companies reporting earnings in line with, or exceeding, expectations,” Harsha Upadhyaya, head of equities at Kotak Mahindra Mutual Fund, said in an interview to Bloomberg TV India today. “If interest-rate cuts are sharp over the next year or so, there is a case for earnings to be upgraded probably in the second half of fiscal year 2014” that starts on April 1, 2013, he said.
Mahindra reported second-quarter profit rose 22 percent to 9.02 billion rupees ($168 million) in the September quarter. That exceeded the 8.45 billion-rupee median of 33 analysts’ estimates compiled by Bloomberg. The stock gained 3.5 percent to 857.9 rupees, the steepest gain since Sept. 24.
Sterlite increased 2.1 percent to 100.55 rupees, the most since Sept. 28. Profit jumped better-than-estimated 74 percent, the company said after trading ended Oct. 23. Indian markets were closed yesterday for a public holiday.
Hero MotoCorp Ltd. (HMCL), the nation’s biggest motorcycle maker, increased 2 percent to 1,832.30 rupees after reporting profit declined 27 percent from a year earlier to 4.41 billion rupees, matching the 4.4 billion-rupee median estimate of 40 analysts surveyed by Bloomberg.
Infosys Ltd. (INFY), the second-largest software exporter, fell 0.4 percent to 2,344.75 rupees.
The S&P CNX Nifty Index added 0.2 percent to 5,705.30 at the expiry of the October derivatives series today. Its futures for November delivery settled at 5,751.45. India VIX, which measures the cost of protection against losses in the Nifty index, held near its record low of 13.04 set on Oct. 22.
The Sensex last month had its biggest gain since January as Prime Minister Manmohan Singh opened retailing and airlines to foreigners, cut fuel subsidies and pared a tax on companies’ overseas debt to revive an economy growing at the slowest pace in three years.
Interest rates need to come down to revive growth, Finance Minister Palaniappan Chidambaram told reporters in Tokyo Oct. 12, saying the reforms drive may create room to lower funding costs. The Reserve Bank of India will reduce the cash reserve ratio by 25 basis points on Oct. 30, according to 11 of 18 economists surveyed by Bloomberg News. The authority has held its benchmark rate at 8 percent since April.
“We would like to see further monetary easing by the RBI, and progress on reforms and disinvestments,” John Praveen, the chief investment strategist at Prudential International Investments Advisers, a unit of Prudential Financial Inc. (PRU), which manages about $960 billion, said by e-mail. “If these materialize, that combined with a favorable global backdrop are likely to push Indian stocks higher in next 3 to 6 months.” Praveen said the Sensex and Nifty may surpass record highs of 21,004 and 6,312 by March next year.
The 30-stock Indian gauge trades at 14.9 times estimated earnings, compared with the MSCI Emerging Markets Index (MXEF)’s 11.5 times, data compiled by Bloomberg show. The Sensex still trades below the 18.7 times multiple at the end of 2010, Praveen said.
The Sensex may finish 2012 at 19,000-20,000 and the Nifty (NIFTY) at 6,000-6,050, he said.
The National Stock Exchange of India Ltd. and the BSE Ltd. traded 801 million shares on Oct. 23, compared with a 12-month daily average of 912 million, data compiled by Bloomberg show.
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