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Indian Stocks Gain as Singh Gets Support for Foreign Retail Vote

Indian stocks rose for a third day, reversing earlier losses, as the leader of the fourth largest party in the parliament said she would support Prime Minister Manmohan Singh’s plan to allow foreign investment in retail.

The BSE India Sensitive Index (SENSEX), or Sensex, added 0.5 percent to 19,486.80 at the close, holding at a 19-month high. The gauge slid as much as 1.1 percent before Mayawati, chief of the Bahujan Samaj Party, said her party will vote in favor of the retail policy tomorrow. Lawmakers voted to back the plan in the lower house of parliament yesterday.

State Bank of India and ICICI Bank (ICICIBC) Ltd. climbed 2 percent each, contributing more than a third of the index’s advance. Tata Motors Ltd. (TTMT), the owner of British luxury car brands Jaguar and Land Rover, rose to the highest level in almost a month. Reliance Industries Ltd. (RIL), owner of the world’s largest refining complex, advanced to a two-month high.

“The support the government has been getting augurs well for the passage of other policies too,” K.K. Mital, a fund manager at Globe Capital Market Ltd., said by phone from New Delhi. “Investors would feel more confident about reforms.”

The Sensex has gained 0.8 percent this week. It rallied 4.5 percent last week as data showing economic expansion slowed last quarter to match a three-year low stoked speculation the government will take more steps to boost growth and investment. Singh in September opened retailing and airline industries to foreigners, and pared fuel subsidies in a wave of policy making aimed at reviving growth and averting a credit rating downgrade.

Foreign Funds

The Sensex has risen 26 percent this year, fueled by fund flows and the policy announcements. Overseas funds bought a net $177 million of stocks yesterday, taking their net purchases in 2012 to $20.5 billion, the most among 10 Asian markets tracked by Bloomberg, excluding China, data compiled by Bloomberg show.

The retail policy change, which will enable overseas retailers such as Wal-Mart Stores Inc. (WMT) to own as much as 51 percent of stores selling more than a single brand in India, didn’t require parliamentary approval to become law. Still, Singh’s government agreed to a vote to end protests that were stalling legislative business. With 15 members in the chamber, votes from Mayawati’s party should push Singh past the number he needs to win the ballot, said Satish Misra, a political analyst at the Observer Research Foundation in New Delhi.

Shoppers Stop Ltd. (SHOP), India’s second largest retailer, rose 1 percent to 469.55 rupees, its highest close since July last year, and paced gains among peers today. The stock has rallied 9.2 percent this month. Pantaloon Retail India Ltd. (PF), the largest, added 0.7 percent to 239.30 rupees, extending its advance this month to 14 percent.

Lenders Rally

State Bank climbed 1.6 percent to 2,307.20 rupees. The stock rose for an eighth day, its longest winning streak since January. ICICI Bank gained 1.4 percent to 1,135.70 rupees, its highest close in 23 months. Tata Motors advanced 2.2 percent to 280.85 rupees and Reliance added 1.4 percent to 843.90 rupees.

Sterlite Industries (India) Ltd. (STLT), the top copper producer, jumped 2.5 percent to 115.65 rupees, the most on the Sensex. The stock, which surged 5.3 percent yesterday, closed at its highest level since March 15. Cigarettes-to-hospitality group ITC Ltd. increased 1.2 percent to a record 301.35 rupees.

Infosys slumped 1.9 percent to 2,338.3 rupees, making it the biggest drag on the Sensex. Bigger rival Tata Consultancy Services (TCS) lost 1.3 percent to 1,280.7 rupees.

Volumes in the Sensex exceeded the 30-day average by 23 percent, data compiled by Bloomberg show. Thirty-day volatility in the gauge was at 10.84, compared with the year’s lowest of 9.06 set on Nov. 26, the data show. The Sensex trades at 15.9 times estimated earnings, the highest since February, compared with a multiple of 11.8 for the MSCI Emerging Markets Index.

The S&P CNX Nifty Index (NIFTY) on the National Stock Exchange of India Ltd. rose 0.5 percent to 5,930.9. Its December futures settled at 5,970.65. India VIX, a measure of options prices, sank 8.3 percent to 15.24.

To contact the reporter on this story: Shikhar Balwani in Mumbai at sbalwani@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

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